Emerson Electric Co. (EMR) Earnings & Analysis

Latest quarter

Emerson reported Q3 FY2026 revenue of $4.9 billion, compared with $4.6 billion in Q3 FY2025. The company’s revenue of $4.9 billion exceeded the consensus of $4.8 billion, while adjusted EPS of $1.71 exceeded the consensus of $1.68.

Emerson reported diluted EPS of $1.28, compared with $1.04 a year earlier. The company reported gross margin of 54.5%, up 1.9 percentage points from Q3 FY2025, and operating margin of 26.9%, up 2.2 percentage points. Free cash flow was $1.3 billion, compared with $977.0 million a year earlier.

Chief Financial Officer Mike Baughman said software and systems, test and measurement, and the Ovation business contributed to sales growth, while China and Europe declined. Baughman said volume, segment mix, price-cost and cost reductions supported adjusted segment EBITDA margin, while free cash flow reflected operating performance, tariff refunds and the timing of tax payments. Emerson’s reported Q3 sales growth of 7.03% was above its prior guidance of 5.50%, and adjusted EPS of $1.71 was above its prior range of $1.65 to $1.70.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Lal Karsanbhai said underlying orders grew across Emerson’s business groups as customers invested in automation for productivity, reliability and resilience. He said demand was led by North America and Asia, including the U.S., India, Japan and Southeast Asia, while Europe and China remained soft but improved during the quarter.

Karsanbhai said investment in power generation, grid modernization, LNG and cybersecurity was supporting Emerson’s project activity. He said the company’s project funnel increased and that Emerson converted opportunities from that funnel during the quarter. He also said repair work was under way in the Middle East, where field-service engineers had returned to pre-conflict operating levels and customers were pursuing energy-security and alternative-export-route projects.

Baughman said price-cost remained favorable and that price and cost reductions more than offset inflation in the quarter. He said adjusted segment EBITDA margin benefited from higher-than-expected volume and segment mix, while software and systems margin reflected software-contract renewals and a higher mix of lower-margin projects. Baughman also said the company recorded tariff refunds in cost of sales and received the refunds on a cash basis.

When analysts asked about the outlook for the Strait of Hormuz disruption, Karsanbhai said conditions could remain similar through Q4 and potentially into the following fiscal year’s first quarter. He said Emerson was not providing fiscal 2027 guidance, though he remained positive about semiconductor activity through that year. Chief Operating Officer Ram Krishnan said Intelligent Devices growth had been constrained by the Middle East sales impact and said China had improved sequentially, with the company planning for low-single-digit growth there in fiscal 2027.

Karsanbhai said new pipeline, storage and transportation projects were being considered to improve network resilience, but said certain products could not practically be moved by pipeline. He said customers would need certainty from an agreement between the United States and Iran before conditions and trust improved.

Guidance

Emerson raised its FY2026 GAAP sales-growth outlook to 5.00% from 4.50% and its underlying sales-growth outlook to 3.50% from 3.00%. The company raised its FY2026 Software and Systems growth outlook to 6.00% from 5.00% and its adjusted EPS outlook to $6.55 from $6.45 to $6.55. Emerson now expects FY2026 free cash flow of $3.6 billion, compared with its prior range of $3.5 billion to $3.6 billion.