Emerson Electric Q3 Earnings Call Highlights

Emerson Electric Q3 Earnings Call Highlights

Emerson exceeded expectations in Q3 fiscal 2026 , with underlying orders up 7%, sales up 6%, adjusted EPS rising 13% to $1.71, and free cash flow increasing 36% to $1.3 billion.

The company raised its full-year outlook, now expecting 5% GAAP sales growth, 3.5% underlying sales growth, adjusted EPS of approximately $6.55, and free cash flow of about $3.6 billion.

Growth was led by semiconductors, power generation, and test and measurement, while Emerson’s project funnel reached $12.4 billion.

The company maintained its plan to return roughly $2.2 billion to shareholders in fiscal 2026 despite an estimated $100 million annual revenue impact from Middle East disruptions.

Emerson Electric NYSE: EMR reported third-quarter fiscal 2026 results that exceeded its expectations, citing broad-based order growth, stronger demand in North America and Asia, and continued momentum in power generation, semiconductors and test and measurement.

President and Chief Executive Officer Lal Karsanbhai said underlying orders rose 7% in the quarter, while underlying sales increased 6%. The company’s growth verticals increased 27%, led by semiconductor growth of 53% and power growth of 37%.

“End market demand is robust, supported by secular trends in our growth verticals and meaningful investment in automation,” Karsanbhai said.

Emerson raised its full-year outlook for sales, earnings and cash flow following the quarterly performance.

The company now expects fiscal 2026 GAAP sales growth of 5%, underlying sales growth of 3.5%, adjusted earnings per share of about $6.55, and free cash flow of approximately $3.6 billion.

It maintained its expectation for adjusted segment EBITA margin of about 28%.

Chief Financial Officer Mike Baughman said adjusted earnings per share rose 13% year over year to $1.71, above the high end of Emerson’s prior guidance.

Adjusted segment EBITA margin expanded 140 basis points to 28.5%, aided by better-than-expected volume and favorable segment mix. Price, cost reductions and price-cost performance more than offset inflation, he said.

Third-quarter free cash flow increased 36% to $1.3 billion, representing a 27.1% margin. Baughman said cash generation benefited from operating performance, tariff refunds and the timing of tax payments that shifted from the third quarter into the fourth quarter.

Emerson’s backlog ended the quarter at $8.2 billion, up 7% from a year earlier, while book-to-bill was 1.0.

Maintenance, repair and operations activity represented 65% of sales.

Software & Systems: Underlying sales rose 11%, including 23% growth in Test & Measurement and 7% growth in Control Systems & Software. Segment margin was 31.8%, down 30 basis points from a strong prior-year comparison. The margin included a 1.5-point drag tied primarily to software contract renewals and a higher mix of lower-margin projects.

Intelligent Devices: Underlying sales increased 5%, supported by the Middle East, project shipment timing and sensors. Segment margin rose 240 basis points to 27.9%, driven by volume leverage, price-cost and cost reductions.

Safety & Productivity: Underlying sales grew 2%, led by electrical products and industrial activity in North America. Segment margin increased 80 basis points to 21.2% as price-cost discipline and cost reductions offset lower volume and inflation.

Annual contract value for Emerson’s software portfolio increased 9% year over year to $1.68 billion.

Management continues to expect annu...