Engineering and automation solutions company Emerson (NYSE:EMR) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 1.3% year on year to $4.43 billion. Guidance for next quarter’s revenue was better than expected at $4.6 billion at the midpoint, 1.4% above analysts’ estimates. Its non-GAAP profit of $1.48 per share was 4.6% above analysts’ consensus estimates.
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Emerson Electric (EMR) Q1 CY2025 Highlights:
- Revenue: $4.43 billion vs analyst estimates of $4.38 billion (1.3% year-on-year growth, 1.1% beat)
- Adjusted EPS: $1.48 vs analyst estimates of $1.41 (4.6% beat)
- Adjusted EBITDA: $1.24 billion vs analyst estimates of $1.21 billion (28% margin, 2.9% beat)
- Revenue Guidance for Q2 CY2025 is $4.6 billion at the midpoint, above analyst estimates of $4.54 billion
- Management slightly raised its full-year Adjusted EPS guidance to $5.98 at the midpoint
- Operating Margin: 19.8%, up from 17.1% in the same quarter last year
- Market Capitalization: $71.4 billion
StockStory’s Take
Emerson’s first quarter results were shaped by steady demand in its Process and Hybrid businesses, sequential improvement in Discrete markets, and successful execution of its supply chain and cost management strategies. CEO Lal Karsanbhai highlighted that underlying orders grew across all regions, with Process and Hybrid up 6% and Discrete businesses turning positive, led by an 8% uptick in Test and Measurement. The integration of AspenTech and completion of portfolio transformation also influenced margins and operational performance, with margin expansion attributed to favorable product mix and synergy realization from recent acquisitions. Management noted, “We have conviction in our process and hybrid markets and are seeing strong indicators for a meaningful second half discrete sales recovery.”
Looking ahead, Emerson’s guidance reflects expectations for continued mid-single digit growth in Process and Hybrid markets, supported by a healthy project backlog and sustained capital investment in sectors like energy, LNG, and life sciences. Management emphasized the company’s ability to offset incremental costs from new tariffs through targeted pricing actions, production reconfiguration, and ongoing supply chain regionalization. As CEO Lal Karsanbhai explained, “We are mitigating these impacts through targeted surcharges and pricing actions, production reconfiguration using our global manufacturing footprint and additional supply chain regionalization initiatives.” The company also anticipates a meaningful recovery in Discrete businesses in the second half of the year, underpinned by improving order trends and easier comparisons.
Key Insights from Management’s Remarks
Management attributed first quarter performance to solid execution in core markets, margin benefits from portfolio changes, and proactive measures to address external cost pressures, including tariffs.
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Process and Hybrid demand resilience: Emerson’s Process and Hybrid businesses benefited from robust project activity in energy, LNG, and life sciences, with significant capital investment in regions such as the Middle East, Africa, and Asia. Management cited a healthy $11.4 billion project funnel and highlighted the importance of maintenance, repair, and operations (MRO), which represented over 60% of sales in the quarter.
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Discrete segment recovery underway: The Discrete businesses, which supply automation equipment for manufacturing, saw underlying orders turn positive, led by Test and Measurement’s broad-based growth and strength in aerospace and defense. However, segments linked to automotive and factory automation, especially in China and Europe, remained pressured.
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AspenTech integration progressing: The completion of the AspenTech acquisition was a key milestone. Management expects the transaction to be modestly accretive to adjusted EPS in 2025, with plans for $100 million in cost synergies by 2028. AspenTech’s annual contract value (ACV) grew 11% year-over-year, driven by digital grid and manufacturing software demand.
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Tariff mitigation actions: Emerson faces approximately $245 million in gross tariff impacts for 2025 but expects to fully offset these through pricing actions, surcharges, and operational changes. The company’s supply chain regionalization strategy allows flexibility to shift production and minimize cost exposure.
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Retention of Safety and Productivity business: Following a strategic review, Emerson decided to retain its Safety and Productivity segment, which comprises about 8% of sales. Management pointed to its market-leading profitability, cash generation, and alignment with reshoring and U.S. manufacturing trends as reasons for keeping the business in-house.
Drivers of Future Performance
Management’s outlook centers on continued strength in Process and Hybrid markets, discrete segment recovery, and mitigation of tariff-related headwinds through strategic actions.
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Sustained investment in core markets: Emerson projects ongoing capital spending in energy, LNG, and life sciences to drive mid-single digit growth in Process and Hybrid businesses. Management referenced a strong backlog and new project awards as supportive of this outlook, while noting gradual improvement in China and sequential gains in Europe.
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Discrete recovery and end-market trends: The company expects Discrete businesses to deliver high single digit growth in the second half, aided by easier year-over-year comparisons and improving demand in Test and Measurement, packaging, and MRO segments. Factory automation and automotive end markets remain areas of caution, particularly in China and Germany.
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Tariff and cost management risks: Emerson’s ability to offset new tariff costs through pricing and operational changes is a key factor for profitability. Management acknowledged that failure to fully mitigate these costs or unforeseen macroeconomic pressures—such as persistent weakness in China or continued softness in factory automation—could affect results.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will track (1) the pace and breadth of discrete segment recovery, particularly in Test and Measurement and factory automation, (2) Emerson’s ability to fully implement its tariff mitigation actions without impacting customer demand, and (3) the realization of cost synergies and growth targets from the AspenTech integration. Progress on expanding in core sectors like LNG, life sciences, and energy transition will also be a key indicator of execution against the company’s strategic plan.
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