エマソン（EMR）2026年度第4四半期・通期決算説明会：受注高14%増、2027年度ガイダンスを提示

要約

• エマソン（NYSE: EMR）の2026年度第4四半期決算は、実質売上高が7%増となった。調整後セグメントEBITDAマージンは160ベースポイント拡大して29.1%となり、調整後EPSは15%増の1.86ドルとなった。
• 実質受注高は14%増加し、ソフトウェア＆システムズの18%増とインテリジェント・デバイスの13%増が牽引した。受注残高は前年同期比11%増の82億ドルに達した。
• 通期の実質売上高は4%増加した。調整後EPSは10%増の6.59ドル、フリーキャッシュフローは9%増の35億ドルとなった。
• 2026年度の成長垂直市場（グロース・バーティカル）は21%拡大し、売上高の27%を占めた。経営陣は2027年度にこれらの市場から10%台前半の成長を見込んでいる。
• 2027年度について、エマソンは実質売上高成長率を約5%、調整後セグメントEBITDAマージンを29%、調整後EPSを7.25ドル、フリーキャッシュフローを38億〜39億ドルと見込んでいる。
• 経営陣は、2027年度に25億ドルの自社株買いと13億ドルの配当を通じて、約38億ドルを株主に還元する計画である。

主要財務データ

事業および営業業績

ソフトウェア＆システムズが第4四半期の成長を牽引し、実質売上高は14%増となった。テスト＆メジャメントは15%増、コントロールシステムズ＆ソフトウェアは14%増となった。同セグメントのマージンは、数量効果、価格コスト効果、製品ミックスに支えられ、490ベースポイント上昇の32.3%となった。

インテリジェント・デバイスの実質売上高は、LNG、電力、アップストリーム・ガス、ミッドストリーム・ガスに支えられ、4%増加した。マージンは製品ミックスの影響で10ベースポイント低下の28.4%となったが、価格コスト効果と数量効果により一部相殺された。

セーフティ＆プロダクティビティの売上高は2%増加した。電気製品と米国の産業活動の好調さが、欧州の継続的な低迷により一部相殺された。マージンは30ベースポイント改善の22.9%となった。

当四半期の成長垂直市場は25%増加した。LNG売上高は68%増、半導体は43%増、電力は24%増となった。四半期売上高に占めるプロジェクトの割合は37%、MROは63%であった。

プロジェクト案件パイプライン（ファンネル）は前年同期比17%増の130億ドルとなり、6億ドル増加した。エマソンは第4四半期中にこの案件群から約5億7,500万ドルを受注し、その75%が成長垂直市場からのものであった。主な受注には、カタールの石油化学プロジェクト、LNGカナダの第2期拡張工事、グローバルなライフサイエンス受託製造業者との10年間のDeltaV MESサブスクリプション契約が含まれる。

地域別では、南北アメリカが米国での11%増を含め9%増加した。アジア・中東・アフリカは、中東・アフリカでの19%増が牽引し、7%増加した。欧州は市場の継続的な弱さを反映し、1%の増加にとどまった。

経営陣の見通し

経営陣は、通期でソフトウェア＆システムズが7%〜8%増、インテリジェント・デバイスが約4%増、セーフティ＆プロダクティビティが3%〜4%増になると見込んでいる。成長垂直市場は10%台前半のペースで拡大すると予想されている。

2027年度第1四半期について、エマソンはGAAP売上高および実質売上高の成長率を約5%、調整後セグメントEBITDAマージンを28%、調整後EPSを1.58〜1.62ドルと見込んでいる。同社はまた、当四半期中に約15億ドルの自社株買いを計画している。

経営陣は、南北アメリカおよびアジア・中東・アフリカ全体で1桁台半ばの成長を予想している。欧州は緩やかに改善し、1桁台前半の成長になると予想されている。中東の見通しは紛争がエスカレートしないことを前提としており、同社は中国での回復を見込んでいない。

リスクおよび注視事項

• 欧州は、特にドイツ、フランス、イタリアにおいて、産業需要の低迷による制約を受け続けている。
• 中国は化学および石油精製市場からの圧力を受け続けている。経営陣は、エマソンの中国における売上高の40%が石油化学および石油精製関連であると指摘した。
• 中東の見通しは、紛争のさらなるエスカレートがないことを前提としている。2026年度の売上高には、これに関連する約8,500万ドルの逆風が含まれていた。
• エマソンは、2027年度下半期における半導体需要の減速を織り込んでいる。経営陣によると、好調が持続すれば会社計画に対する上振れ要因になる可能性がある。
• 受注残高のうち長期サイクルの案件が占める割合が高まっている。12か月以内に売上化すると見込まれる割合は、過去安定していた75%から70%に低下した。
• 上半期のマージンは、プロジェクトミックスおよびインテリジェント・デバイスの拡張に伴う立ち上げコストの影響を受ける見通しである。

アナリスト質疑応答のハイライト

経営陣は、2027年度の5%成長見通しについて、好調な受注と受注残高を反映しつつも、欧州と中国への慎重姿勢を織り込んだものと説明した。両市場での改善は緩やかなものにとどまると見込んでいる。

電力需要は、既存設備の近代化から新設（グリーンフィールド）発電プロジェクトへと拡大した。エマソンの約25億ドル規模の電力事業は25%成長し、主に新設プロジェクトに牽引された制御システム部門は45%近く増加した。

テスト＆メジャメントは、航空宇宙・防衛および半導体需要に支えられ、上半期も勢いを維持する見込みである。経営陣は、前年同期のハードルが高いことや半導体サイクルの不確実性を理由に、下半期の成長鈍化を想定している。

エマソンは、アスペンテック（AspenTech）とのシナジー効果1億ドルを当初目標より2年前倒しで達成した。同社は、ソフトウェアの更新サイクルが2027年度の売上高に対し約35ベースポイントの追い風になると予想している。

経営陣は、10億ドル以下のボルトオン型（補完的）買収の検討は継続するものの、大規模な企業買収は現在の3か年資本配分計画には含まれていないことを示した。自社株買いの前倒し実施は、将来のボルトオン買収への柔軟性を維持しつつ、株式数を削減することを目的としている。

決算説明会文字起こし全文

---

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, and welcome to Emerson's Fourth Quarter and Full Year 2026 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to your host, Carl Schumacher, Vice President of Investor Relations at Emerson. Please go ahead.

Carl Schumacher

Good morning. And thank you for joining Emerson's Fourth Quarter and Full Year 2026 Earnings Conference Call.

Before we begin, please allow me to take a moment to introduce myself. My name is Carl Schumacher. I've recently been appointed as Emerson's new Investor Relations leader. I've been with Emerson for over 12 years now, and I've had the opportunity to hold finance leadership roles across multiple geographies and segments. Most recently, I served as the segment CFO for Test & Measurement. I'm excited to work with everyone, and I look forward to meeting with you all soon.

Today, I am joined by Emerson's President and Chief Executive Officer, Lal Karsanbhai; Chief Financial Officer, Mike Baughman; and Chief Operating Officer, Ram Krishnan. I would encourage everyone to follow along with the slide presentation, which is available on our website. Please turn to Slide 2.

This presentation may include forward-looking statements, which contain a degree of business risk and uncertainty. Please take time to read the safe harbor statement and note on the non-GAAP measures.

I will now pass the call over to Emerson's President and CEO, Lal Karsanbhai, for his opening remarks.

Surendralal Karsanbhai

Thank you, Carl. Good morning, everyone. I'd like to begin by thanking Emerson's 70,000 employees for their dedication, passion and perseverance. Together, we delivered a strong fourth quarter and finish to 2026. Emerson has the most talented team in the automation industry, and our efforts are reflected in the results we will discuss today. More importantly, this team has positioned us to keep winning. One year ago at our investor conference in New York City, we outlined the value creation framework. One year into this 3-year plan, we met our strategic objectives, and remain on track to deliver our 2028 commitments. Our momentum carries into 2027, driven by our growth verticals and supported by secular macro trends. Customers are investing in automation at a rapid pace, and our orders reflect it. The diversity of our customer base and the range of industries we serve give us confidence in the resilience of the company we have built.

As I complete my sixth year as CEO, I reflect on the strength of the Emerson Management System, designed in the 1970s under Chuck Knight's leadership, it has evolved over time, but most meaningfully over the past 6 years. We have deliberately changed our culture to push trust and empowerment deeper into the organization, while maintaining a high standard of accountability. This environment enables us to attract and retain top talent, energized to deliver outstanding results and create differentiated value. I am excited about the opportunities ahead and more confident than ever in Emerson's future. Lastly, I would like to thank our customers, the Emerson Board of Directors and our investors for your continued trust in us. Please turn to Slide 3.

Underlying orders grew 14%, with broad-based demand across all business groups. Demand was most pronounced in Software & Systems, up 18% and Intelligent Devices, up 13%. All regions experienced growth, led by North America, up 15% and the Middle East, up 42%. I will discuss more details on demand later in the presentation.

Emerson exceeded expectations for sales and profitability in the fourth quarter. Underlying sales were up 7% and with Software & Systems accelerating to 14% growth, with strength in Test & Measurement up 15% and Control Systems & Software up 14%. Adjusted segment EBITDA margin expanded 160 basis points to 29.1%, and adjusted earnings per share increased 15% to $1.86.

For the full year, we delivered underlying sales growth of 4% and adjusted earnings per share rose 10% to $6.59, both above expectations. Free cash flow was up 9% to $3.5 billion, and we completed $1 billion of share repurchase, retiring 7.2 million shares. As expected, annual contract value of our software grew 10.1% to $1.7 billion.

For fiscal 2027, we are guiding underlying sales growth of 5%. We expect to deliver adjusted segment EBITDA margin of 29% and adjusted earnings per share of $7.25, reflecting meaningful progress on the pathway to our 2028 targets. We plan to continue returning substantial capital to shareholders, and we expect to return $3.8 billion in 2027, $2.5 billion in share repurchases and $1.3 billion in dividends, a 7% dividend per share increase of $0.16. Please turn to Slide 4.

Emerson navigated the conflict in the Middle East and inflationary headwinds to deliver another year within our value creation framework, demonstrating the resilience and profitability of our automation portfolio. Underlying sales growth was led by the United States and the Middle East, both of which were up high single digits, offset by persistent softness in Europe and China.

Our growth verticals were up 21% year-over-year as secular tailwinds are supporting investment across greenfield projects, modernizations and MRO. Adjusted segment EBITDA margin of 28.2%, expanded 60 basis points, driven by price/cost and the benefit of cost reductions and synergy realization. We also realized $100 million of synergies at AspenTech, completing the integration 2 years ahead of our initial target. Adjusted earnings per share of $6.59 marked our sixth consecutive year of double-digit adjusted EPS growth. Emerson demonstrated strong free cash flow generation at a margin of 18.6%. Please turn to Slide 5.

Underlying orders grew 14% in the fourth quarter with broad-based demand across the portfolio and strength in long-cycle project activity, led by power, LNG and aerospace and defense. Test & Measurement orders growth of 14% exceeded expectations with semiconductor up 59%. Control Systems & Software orders were up 20%, with orders in our Ovation business up 26%. North America, Southeast Asia and the Middle East saw significant demand from our growth verticals and energy security projects. China orders remain negative as both chemical and refining continue to weigh on demand.

Electrification is benefiting Emerson across the technology stack as power generation projects, modernizations and grid investments are advancing in all regions. The need for energy security is also increasing, the capital being deployed in LNG and traditional energy projects. Last November, we outlined an opportunity pipeline of 315 million tonnes per annum of LNG yet to be awarded and approximately 100 million tonnes per annum were awarded in 2026. However, the demand for gas continues to grow, and we now see an opportunity of 275 million tonnes per annum remaining.

Nearshoring and self-sufficiency investments continue to unlock activity in semiconductor, life sciences and aerospace and defense. These opportunities are manifesting in our project funnel which increased $600 million to $13 billion, up 17% year-over-year. New capital formation is being driven by our growth verticals which were up $500 million sequentially. In our fourth quarter, Emerson won approximately $575 million from the funnel. 75% came from our growth verticals and I want to highlight a few large wins.

First, we were selected for a major petrochemical project in Qatar, where our customer is expanding downstream capacity with a world-scale ethylene cracker complex. Emerson will provide integrated control and safety systems as well as measurement instrumentation. We were chosen for our proven reliability and demonstrated performance on the first phase of this facility.

Next, Emerson was chosen by LNG Canada for their Phase 2 expansion at their LNG export facility in Kitimat, British Columbia, which will double the capacity from 14 million to 28 million tonnes per annum. Emerson will provide our leading valve and sensor technology, building on the success of our Phase 1 solutions.

And finally, Emerson signed a 10-year DeltaV MES subscription agreement with a leading global life sciences contract manufacturer. Spanning multiple systems across 3 sites, Emerson's software will help improve operational efficiency through automated data collection, more accurate electronic batch records and more consistent manufacturing workflows. Please turn to Slide 6.

We expect the United States, India, Southeast Asia and the Middle East, as well as our growth verticals, to be strong contributors to growth again in 2027. The Americas account for around half of Emerson sales and grew 7% in 2026. We expect sales to be up mid-single digits in 2027, underpinned by broad-based growth in the United States with healthy MRO. We are planning for significant activity in growth verticals in the United States, where about 1/3 of our business is serving power, LNG, life sciences, semiconductor and aerospace and defense. In Latin America, electrification and energy security needs are expected to unlock project activity.

Europe was down 1% in 2026. And we project a modest improvement to low single-digit growth with sustained project activity in LNG, power and life sciences, offset by lingering weakness in industrial markets. We do not expect an inflection in the region as demand in Germany, France and Italy remain soft.

Approximately 30% of Emerson sales are in Asia, the Middle East and Africa, which collectively grew 3% in 2026, including an approximately $85 million headwind related to the conflict in the Middle East. In 2027, we model mid-single-digit growth with continued momentum in the Middle East, which we expect to be up high single digits again, assuming the conflict does not escalate. Rehabilitation work is progressing and resiliency investments provide long-term opportunities in this region. We are not planning for a recovery in China, due to the persistent headwinds in both chemical and refining. We have a mid-single-digit outlook for the rest of Asia as energy security, grid modernization and FPSOs support greenfield investment and stable MRO.

Growth verticals grew 21% in 2026 and now comprise 27% of Emerson sales. We expect low double-digit growth in 2027, driven by secular trends of electrification, energy security and nearshoring, which are supporting investments in automation globally and most prominently in the United States.

Our other automation markets were collectively flat in 2026 with prolonged weakness in Europe and China. We model a moderate increase to low single-digit growth in 2027 with improving MRO activity from pent-up demand in energy and favorable trends in North American industrial activity and electrical equipment. We are entering 2027 from a position of strength, and I am confident in our plans to deliver the year.

With that, I will now turn the call over to Mike Baughman to discuss our financial results and guidance in more detail.

Michael Baughman

Thanks, Lal. Please turn to Slide 7 for a more in-depth look at our Q4 financial results. As a reminder, the impact of tariff refunds are excluded from our adjusted earnings results. Q4 underlying sales grew 7%, with volume contributing 4 points. Each of our business groups exceeded expectations, led by Software & Systems up 14%. I will provide more details on geographic and group performance on the next 2 slides.

Backlog ended the quarter at $8.2 billion, up 11% year-over-year, and our book-to-bill was 1.01 above typical seasonality. Adjusted segment EBITDA margin was 29.1%, up 160 basis points. Margin expansion exceeded expectations due to better volume in Software & Systems and Intelligent Devices as well as favorable segment mix. Price/cost and cost reductions more than offset inflation. Adjusted earnings per share was $1.86, up 15% year-over-year. Operations contributed an incremental $0.25 with $0.19 from Software & Systems. FX was a $0.01 headwind. Fourth quarter free cash flow was $916 million, up 9%, with a margin of 17.6%. Full year free cash flow of $3.5 billion was also up 9% and margin expanded 60 basis points to 18.6%.

Please turn to Slide 8 for details on Q4 underlying sales by region. The Americas grew 9% with the U.S. up 11%. The pace of business remained strong in the U.S. with Software & Systems and Intelligent Devices, both up low double digits. Growth was broad-based across end markets, with the majority of our business units up mid-single digits or better in the U.S. Asia, Middle East and Africa grew 7% and led by the Middle East and Africa, up 19%, while Asia was up 2%. Another outstanding performance by our teams in the Middle East led to a smaller adverse revenue impact than expected in the quarter. As the duration of the conflict extends our customers and our teams have consistently found ways to drive business continuity. Europe continued to experience weak markets and grew 1%.

Globally, our growth verticals contributed meaningfully to sales and were up 25% in the quarter. Growth was strongest in LNG, which was up 68%, benefiting from the delivery of projects. Growth was also robust in semiconductor, up 43% and power, up 24%. MRO was 63% in the quarter and projects ticked up slightly in the quarter to 37% of sales. We saw sustained strength in North America MRO and robust project activity in the Americas, Middle East and Southeast Asia.

Please turn to Slide 9 for details on fourth quarter underlying sales and margin performance for our 3 business groups. Software & Systems was up 14% underlying as Test & Measurement grew 15% and Control Systems & Software grew 14%. We saw significant growth in power, LNG and semiconductor. As expected, ACV grew 10.1% year-over-year. Software & Systems margin of 32.3% increased 490 basis points due to leverage on volume, price/cost and mix.

Intelligent Devices underlying sales were up 4%, better than expected, largely due to Final Control delivering more project shipments in the Middle East. Growth was led by LNG, power, upstream gas and midstream gas. Intelligent Devices margin of 28.4% was down 10 basis points year-over-year, driven by mix, offset by strong price/cost and leverage on volume.

Safety & Productivity was up 2% underlying. Strength in electrical products and U.S. industrial activity was offset by persistent weakness in Europe. Safety & Productivity's margin of 22.9% was up 30 basis points year-over-year due to price/cost and cost reductions offset by inflation.

Please turn to Slide 10 for our 2027 underlying sales guidance by business group. We expect Software & Systems to grow 8% to 9% in the first quarter and 7% to 8% for the full year. We are planning for high single-digit growth in both Test & Measurement and Control Systems & Software from broad-based demand in the U.S. and growth verticals. ACV is expected to grow approximately 10% in 2027. Intelligent Devices is projected to grow 3% to 4% in the first quarter and 4% for the full year, supported by stable MRO, project activity in growth verticals and strength in the United States. Safety & Productivity is modeled to grow 3% to 4% in both Q1 and the full year. While we are seeing continued growth in electric utilities and North America industrial activity is encouraging, European markets are soft. Overall, Emerson expects to grow approximately 5% in both Q1 and the full year.

Please turn to Slide 11 for details on our full year and Q1 2027 guidance. For the full year, we are guiding GAAP and underlying sales growth of approximately 5%. We expect a more normalized pricing environment in 2027 and have built 2% price realization into the plan. We expect adjusted segment EBITDA margin of 29%, up 80 basis points year-over-year. We are guiding 2027 adjusted earnings per share of $7.25, up 10% and free cash flow of $3.8 billion to $3.9 billion. As Lal discussed, we plan to return approximately $3.8 billion to shareholders through $2.5 billion of share repurchase and $1.3 billion in dividends, including raising dividend per share by 7%. We are entering our 71st consecutive year of increased dividend and a $0.16 dividend per share increase we have modeled demonstrates our commitment to the dividend.

Moving to the first quarter. We expect GAAP and underlying sales growth of approximately 5% and adjusted segment EBITDA margin of 28% and adjusted earnings per share of $1.58 to $1.62. We are also planning to complete approximately $1.5 billion of share repurchase in Q1.

Please turn to Slide 12. At our Investor Conference last November, we introduced our value creation framework, which rests on 3 pillars: organic growth; operational excellence; and capital allocation. We also laid out clear targets for 2028. Our automation portfolio is aligned to multiyear secular tailwinds that support 4% to 7% underlying sales growth. Our operational excellence has been a hallmark of Emerson for generations. And our capital allocation is focused on returning cash to shareholders through meaningful share repurchases and dividend increases. We delivered 2026 and exited the year with strength in orders and a backlog position that give us confidence in achieving 2027 results that are right in line with our 2028 targets.

With that, I will now turn the call back to the operator for Q&A.

Operator

[Operator Instructions] Your first question comes from the line of Scott Davis with Melius Research.

質疑応答

Scott Davis

I just wanted to stress test the guidance. Just a little bit, I have to ask. I mean, you had orders up 14%. You got backlog up 11%. Last quarter, orders were up 7%. I can understand the Q1 kind of being relatively conservative on the top line with the 5%. But I would have thought you would have had that accelerating a little bit after Q1. Are you just being conservative on Europe and short-cycle stuff or a little cushion in there? Just maybe help us understand those kind of deltas.

Surendralal Karsanbhai

Yes. Great question, Scott. We obviously feel very good about the pacing of orders as we exited really, the last 2 quarters and saw significant acceleration in the growth vertical orders, particularly. And as Mike pointed out, 37% of the Q4 really being driven by projects, whether those are modernizations or greenfield investments. So that acceleration gives us significant confidence as we head into the year, and particularly reflected in the backlog growth in the business as well.

Having said that, I think your point is valid. We have Europe that continues to be something that we need to watch given the negative performance in 2026. And of course, China, although there was positivity in China in a few of our markets like Test & Measurement, overall, it continues to be a concerning market for us, and that has combined with Europe, led us to the guide that we put together.

Scott Davis

Makes sense. And I have to ask a question. Just I'm sure the script is written before the election results. Any tweaks that you would make based on the election results or end markets that you might think might be a little better or a little worse?

Surendralal Karsanbhai

Not really. I mean I think we've -- I think the industrial policy of the United States, particularly over the last 2 years has been really positive for our business. Certainly, an energy policy, a nearshoring policy has benefited Emerson, and we expect that to continue because ultimately, those policies do create American jobs and do create American well-being. So we hope that continues. I don't think I would change anything related to how we outlook the year right now.

Operator

Your next question comes from the line of Andy Kaplowitz with Citi.

Andrew Kaplowitz

Well, maybe you could characterize a little more of the surge in orders that you saw in Q4 and especially in the Middle East. I know you mentioned a large petchem project in the region, but I assume much of that growth in the region is associated with energy security type projects. So when you step back for the overall company, do you think this recent order surge is somewhat durable into '27 when you look at energy security under the ongoing cycles you have that you mentioned power, LNG, Test & Measurement?

Surendralal Karsanbhai

Yes, Andy, really good question. So maybe answering the first part. The Middle East continues to invest in 2 facets. One, gas production, liquid production, but of course, the downstream investments as well. And then secondly, on resiliency projects, whether that's pipeline storage, transportation, which we're starting to see as well. The particular project that we won in Qatar that I referenced is a downstream petrochemical project, the largest expansion of the downstream facility we've seen in the region in many decades, which was encouraging to see in the midst of all the disruption, of course, resulted in the war. So that customer had enough confidence to move that forward and finance it, and we were excited to be awarded the project.

To the second part of your question, we absolutely believe that there is continued momentum in the Middle East and Africa as we go into 2027 in both facets of that type of work. So we're excited about what the what the team is accomplishing there and for the outlook. Now that assumes, Andy, of course, that we're kind of status quo on the war. But if that's the case, we feel really good about what the plan that we put forward here.

Andrew Kaplowitz

That's great. And then Ram, Mike, I think you've been relatively positive regarding Emerson's ability to price. Pricing, I think, ended around 3% for the year, price versus cost stayed in the green. So maybe give us more color to what's embedded in your 2027 expectations. In terms of pricing and the confidence level you have to stay ahead of cost given cost efficiency already out there. I think you've got sort of normal incrementals modeled for '27, but maybe just elaborate on that.

Ram Krishnan

Yes. So 3% price was this year, obviously, 1-point came from tariff and 2% normalized pricing. And so going into next year, we feel pretty good about 2% price in the plan. That's normal level of pricing. I think it's supported by our positioning in almost every category and every end market. So we feel pretty good. That's how we've gone into the year. Now certainly, inflation, particularly material inflation, we've modeled in electronics, and some of the pricing related to memory will be unfavorable. Tariffs will be marginally favorable versus this year. But net-net, good positive green on price/cost should underwrite the incrementals and the margin plan for next year.

Operator

Your next question comes from the line of Steve Tusa with Wells Fargo.

Charles Stephen Tusa

Just on the first quarter, it looks like I think the implied incremental is a little bit lower than what you've guided for the year. I think you've got a bit of an easy software comp. Is there something else in the bridge for the first quarter on margins that we should be aware of?

Michael Baughman

Steve, it's Mike. Yes. For the first quarter, we'll see year-over-year improvement. And as you point out, we'll get some software contract renewal benefit there. We do have some mix. We're continuing to deliver more projects. We've got some start-up costs that's coming in for an expansion that we've done that will affect really the first half, and that reads through in Intelligent Devices. And we continue to invest in the business.

As we look at '27, for the full year, we've dialed in about 80 basis points of improvement, and there will be the software contract dynamic, which creates a tailwind. And we will continue to do what we've been doing around price/cost being green and offsetting inflation and cost reduction. So we feel very good about the profitability that we've dialed in and the full year incrementals, I think at the midpoint, are sitting right there at about 40%.

So we feel like we've put together a very responsible profitability plan as we move into '27. Although as you point out, out of the gate here, consistent really with, I think, the pacing that we had last year, the first quarter is a little slower than the rest of the year.

Charles Stephen Tusa

And is there something different in the mix relative to 4Q? Because I mean, 4Q, I think you had some decent greenfield in 4Q, any different in the mix versus 4Q?

Michael Baughman

Yes. So 4Q was really a story of Control Systems & Software, where we had a very strong quarter that came in at 33.1%, which was above our expectations and above the prior year of 27%, which was the lowest quarter of the year, so they had some easy comps. But Q4 had several tailwinds. We continue to do very well in power. So Ovation is in that segment and continues to do well. We had a good quarter in software, so the mix was good. It was the end of the year where we've got project closeouts that typically happen. Sometimes those are positive. Sometimes they're a negative. This year, they were positive. And then we also had good price there. We had the pricing dynamic with the memory cost coming in. I think we've talked about it before that in Q3, we had a little bit of leakage in price that all came back in Q4. So they had 5 points of price in that segment.

So that's really what drove the quarter ahead of expectation. And it was just a confluence of a lot of goodness at CSS that did all in the quarter.

Operator

Your next question comes from the line of Andrew Obin with Bank of America.

Andrew Obin

Just a question on corporate expense in the fourth quarter. It came in sequentially quite a bit higher than we thought. What's driving it? Are we pulling any expenses forward here?

Michael Baughman

Yes, Andrew, great question. All the goodness I talked about at CSS, we have the exact opposite story at the corporate level, and we were about $45 million higher than we expected to be. I would tell you that, that is several individually inconsequential items that all added up to a big number. And if you look at the EPS bridge, I think it's worth noting that was about $0.05 that was offset by lower interest and share count and we continue to get tax benefits year-over-year. So it really didn't have a big impact on the EPS.

Now what was it? We had some FX headwinds. At corporate, we manage assets that are nonoperating assets. Sometimes we have gains, sometimes we have impairments and losses. This quarter, we actually had modeled in a small gain that didn't happen, and we had an impairment that we had to take. We also had a really bad performance around our medical claims experience, corporate charges those out for the year and then pays the actuals and takes the over under. So we had a bad quarter there. And then there was just some smaller items, all of which broke that.

Now in terms of discretionary investments, we did make some discretionary investments in IT. And I think that it's worth noting we continue to plan those investments out into '27. So if you bridge '26, we finished the year at corporate/other about $209 million. The $45 million that we saw in Q4 will largely not repeat, but we will be making an incremental investment of about $25 million through 2027 in digital enablement to improve our commercial tools that support the sales force, contracting, HR systems, and really getting us in a position to better leverage AI as we move forward.

So that incremental $25 million will read through and then we've got some inflation that gets you to the $195 million assumption for 2027. So yes, Andrew, a tough quarter at corporate with a lot of one-offs that won't affect '27 in any meaningful way, but we are investing in '27 in the digital enablement that will read through.

Andrew Obin

And just a follow-up just on orders. How should we think about how much of your order book right now is actually for '28 versus '27? Because I do appreciate your comments on China and Europe, but I would imagine orders reflect those markets as well. So maybe can you talk about from a temporary like time perspective, how does it flow? What percent of your order book is for '27? And how much of it now extends into '28?

Michael Baughman

Yes. Andrew, you'll see in the 10-K, we make that disclosure of the percent of the backlog in the next 12 months. And that has been pretty sticky at 75% for a long time. That dropped to 70%. So it's a -- your point is a good one and one that we've been making as well that the order book is filling up with long cycle, and that's starting to read through. Now that said, MRO activity remains robust in certain markets, and it exited the year very healthy high single digits. And supported, obviously, the 7% growth in the quarter. So we feel very good about the orders. But yes, some are longer dated.

Operator

Your next question comes from the line of Nigel Coe with Wolfe Research.

Nigel Coe

Just wanted to just dig into a little bit there, divergence between -- obviously, Software & Systems, if we -- software solutions, if we -- I'm assuming the control systems portion of that is growing high single digits, obviously, double digits this quarter. The ID portfolio is growing 4% in 2027. So I just want to understand a little bit better that divergence. I'm assuming it's project versus MRO, but any additional color would be great.

Ram Krishnan

Yes, I think -- I mean -- so, Nigel, Ram here. On the two dynamics on Software & Systems, now obviously, there's T&M growth in there, which is strong growth at 15%. Our power business, the Ovation business had significant growth in the quarter, and AspenTech had strong growth. So those are the dynamics as it relates to a secular tailwinds around T&M and power that is driving the growth. Intelligent Devices, of course, which is our Final Control and our sensor business has broad-based participation across many markets. And frankly, the dynamics around Europe, China and also the Middle East did impact Intelligent Devices.

Nigel Coe

Great. And then you mentioned Middle East. I had to check the number twice, 40% plus growth in the quarter. How much of that is just kind of a catch-up on prior activity? I think you're assuming that strength continues in 2027. So I just want to understand a little bit better what you're seeing in the Middle East? And how much of this is just catch-up versus new project stroke rebuild?

Ram Krishnan

Yes. I mean, obviously, a big part of it was related to project activity. We did reference the downstream petrochemical project in Qatar, which was a big win for us, but there was plenty of good activity in Saudi and UAE as well. So I think timing on projects plus strong MRO in the quarter, which should continue, assuming there is no additional bad news in the Middle East and disruptions as it relates to the war. I think all end markets, Qatar, UAE, Saudi and obviously, a strong Africa is what we've modeled in for next year. And at this point, we feel pretty good about that plan.

Operator

Your next question comes from the line of Julian Mitchell with JPMorgan.

Julian Mitchell

Maybe just wanted to start off with the capital deployment and sort of cash flow as that hasn't really come up. So you've been very disciplined or constrained on M&A activity for a couple of years now. I'd wonder if you might become a bit more expansive given that, but I suppose should we read the large buyback as a sign that M&A probably remains very limited for some time?

Surendralal Karsanbhai

Julian, Lal here. Yes. I think you've read that correctly. We made a commitment in 2025 at our Investor Conference around capital allocation and really a focus on returning cash to shareholders over this 3-year cycle. Obviously, at year-end now guiding into the second year, we maintain that in line with that plan. Having said that, there is ample fire power for bolt-on acquisitions. We continue to work those. So in terms of bolt-on M&A, $1 billion, sub-billion dollar type opportunities, we'll continue to evaluate them. But in terms of the large-scale work we had done in the past, that's not in the cards in this plan.

Julian Mitchell

Understood. And then maybe on the organic revenue outlook for Test & Measurement, just wondered kind of how you've thought about that. You had mid-teens growth in Q4. I think you've guided to sort of steady high single-digit growth through the next 12 months. I understand it's quite a book and ship business comps are tough. So maybe sort of unpack that T&M sales guide a little bit, please?

Ram Krishnan

Yes. Ram here, Julian. Yes, you said it. I think at the end of the day, for us, the momentum in T&M, which was about 15% growth in Q4 will certainly continue into the first half because we've got visibility on the aerospace and defense segment is very strong. Semis are very strong, and portfolio has moderated but still high single digits. Obviously, the one segment, which is now less than $200 million of the portfolio is the automotive piece, which is the only segment that is slow.

Now what we have baked in is a strong first half and then a moderating second half just given a cautious approach to where we see the semi cycle and the power of tougher comparisons. So I think it's a par plan, how we've laid out. Now obviously, if the semi business continues to be strong into the second half, then we can certainly do better than the plan we've laid out.

Operator

Your next question comes from the line of Alexander Virgo with Evercore ISI.

Alexander Virgo

I wondered if you could just talk a little bit about the complexion of your power orders. You've talked in the last couple of quarters of those orders really stemming from brownfield investment. And I'm wondering whether or not we've started to see the benefit of behind-the-meter and new power generation orders starting to filter through into those numbers. That would be my first question.

And then on the follow-up, I wondered if you could just give us a sense of how much of the software growth in the quarter was from renewals? And just as we think about that 10% ACV growth next year, where we should be expecting to see sort of lumpiness from those renewals as we look into '27?

Ram Krishnan

Okay. I'll take the first one. On the power side, broad-based power activity. Certainly, the fleet modernizations is where the power activity started, but now it is broad-based where we see greenfield expansions, both brownfield and greenfield and the greenfield activity is certainly -- has been very, very strong in Q4, and we expect that to continue into next year. Overall, our power business, about $2.5 billion, grew at 25%. Our control systems portion of the power business, which is primarily driven by greenfield was up close to 45%. So we are seeing strong momentum and no slowdown in power, and we expect to repeat that going into next year.

Michael Baughman

So on your second one, Alex, around software, we continue to do very well with our software. And obviously, this year, it was a bit of a headwind with the renewal dynamic costing us 70 basis points. As we've talked about, that unwinds, roughly half next year, half in '28. We'll get a little more than half next year. So for the year, that should be a tailwind of around 35 basis points. I think that's the question you were getting after.

Operator

Your next question comes from the line of Amit Mehrotra with UBS. [Operator Instructions]

We will take another question from the line of Joe O'Dea with Vertical Research.

Joseph O'Dea

You gave some helpful color on some of the growth within growth verticals in Q4. And I was wondering if you could do the same in terms of what rolls up to low double-digit expectation in '27? And any color on the growth hierarchy across our LNG, life sciences, semis, A&D?

Ram Krishnan

Yes. I mean I think -- well, power and LNG certainly would be in the higher end of that forecast. We see that activity continuing to be very, very strong. Life sciences will be more high single digits. The semi business is where we've modeled as basically mid-single digits, a strong first half and some slowdown modeled in for the second half, which is the wildcard, which if it doesn't happen, we'll have an opportunity to outperform. So that's kind of how we're thinking about it. And strength in [ LNG ] continues in the high single digits to low double digits type performance.

Joseph O'Dea

Understood. And then, Lal, you made a comment about completing the Aspen integration a couple of years ahead of target. And just interested in the setup for growth as you move forward and the go-to-market approach and how you're now poised to leverage the full scope of Emerson capabilities with that addition of Aspen and the full integration.

Surendralal Karsanbhai

Joe, thanks for the question. We're very excited about the momentum that's building at Aspen as we came through the second half of this year. The team delivering overall in Software & Systems, 10% ACV growth and gives us confidence as we go into 2028. And the focus inside of Aspen has been twofold. Number one, accelerate new product development and suites of new products into the marketplace, both within its traditional Aspen products but as well into the DGM space. And then number two, integration of technology within DeltaV innovation to enable our customers' journey to an autonomous future to be possible in the future.

And then I'd say the third thing and the work that's been done by the team is really around the commercial engine. It's the customer success journey to manage retention. It's the acquisition of new logos at AspenTech and a lot of work there done in conjunction with the broader DeltaV innovation teams as well. So great momentum, a really good job by the team integrating and delivering the synergies 2 years ahead of schedule. And now as we go forward with a lot of confidence.

Operator

Your next question comes from the line of Brett Linzey with Mizuho.

Brett Linzey

I wanted to just follow up on the Middle East disruption. So earlier in the year, you had described as roughly $100 million of rebuild and restart opportunities. I guess how much of that is converted, if any? And when you think about the '27 guide framework, how much are you assuming is rebuild or of that $100 million? How much is assumed within the framework for the year?

Ram Krishnan

So we've got some of that this year. I would say from a modeling perspective, $50 million to $75 million is still available in terms of rebuild opportunity or rehab opportunity going into next year. That's kind of how we're thinking about it.

Brett Linzey

Okay. That's helpful. And then on Test & Measurement into next year, is the bigger opportunity around the top line recovery? Or is there really a nice operating leverage story as that volume comes back? I know you guys have taken a lot of cost out of that business. Just trying to think about the incremental margin profile into next year.

Ram Krishnan

Yes. I think the answer is both. I mean, obviously, the orders momentum supports another strong year from a top line perspective, and we drove really good leverage and significant margin expansion this year and a similar type of expansion model in for next year.

Michael Baughman

Yes. Brett, I would just add, our commitment there was to get to 31% in 5 years. We ended the year at 29%. I certainly would expect there to be 1-point plus of improvement coming or going through '27. So we're certainly on track with the commitments that we laid out at the beginning there.

Operator

Your next question comes from the line of Andrew Buscaglia with BNP Paribas.

Andrew Buscaglia

Just wanted to touch on Intelligent Devices. So it's been another year of kind of low growth in that segment. It's picking up a little bit in the second half and orders suggest that could be changing a bit. So what is it that -- what sort of underlying sub-verticals or regions need to improve meaningfully to get you back to like a high single-digit number that you've done in years past? Like what's really kind of the biggest drag that needs to flip?

Ram Krishnan

For us, Europe and China. So I think the impact of Europe and China in Intelligent Devices is significant, and that really has to turn in a meaningful way. And we've not -- we don't see that. We don't see that where you're talking high single digit. I think our long-term model for Intelligent Devices is a 3% to 6% type framework. Now there will be years where we'll go past the 6%, but I think at this point, I think it's a par plan, and it's got a reasonable expectation for Europe and China built into it going into next year.

Andrew Buscaglia

Yes. And specifically on China, you kind of called it out early as like one of the reasons precluding you from putting out a bigger guide relative to your orders on the top line. What is it that's most concerning to you that could go one way or the other in that region? I guess what do you have your eye on that could change one way or the other as the year progresses?

Ram Krishnan

Again, I think, as Lal said earlier, we see pockets of -- I mean our Test & Measurement business, for example, had 31% growth in China. Now it's $200 million out of the $1.8 billion we do in China. We see good activity in power, and we see good activity in export business from China now and marine. So as those become a larger part of our business, I think you'll see some net positive there. But the biggest issue we have is 40% of our sales in China is exposed to petrochemical and refining. And that segment has to receive new capital formation in a meaningful way, and it is overcapacitized. So until we see that move in a direction of new capacity being added, it's going to be hard for us to turn China around. Now we does have the power of easier comparisons going into next year. So we'll see growth. But for China to return to historic levels, it's got to have greenfield investment in chemical, petrochemical and refining.

Operator

Your next question comes from the line of Varun Govindaraj with Bernstein.

Varun Govindaraj

I just wanted to dive a little bit deeper. I mean you talked a bit about China, but on the Europe side, a, it is a market that's in decline. It is a market that's not growing very fast. What's your strategy there? How are you thinking about in an environment where the market isn't growing all that much? Are there any levers that you can pull to try and gain share?

Surendralal Karsanbhai

Absolutely. We've done a lot of work in identifying white spaces, identifying new customer segments, new markets because to your point, we do see extraordinary growth in China in our Test & Measurement business. They're very -- there's significant growth in semiconductor, in the humanoid segment and other elements of the economy. So the job of our selling organizations, as they reset, is knocking on new doors and finding those new customer segments that are actually spending share of wallet. So really important for us to do in both China and Europe as we go through this year. And I think we're set up to execute in that fashion.

Varun Govindaraj

And then as a follow-up, can you share any incremental feedback on the Nigel AI assistant platform that you've launched for LabVIEW. It's been out for some time now. How has customer feedback been? And are you seeing any impact on retention rates from it?

Ram Krishnan

Yes. I think, first off, great customer feedback. In fact, we do our annual event at NI Connect and where we bring a lot of our customers in and Nigel was obviously, a big feature of how -- what we shared with our customers and the feedback has been overwhelmingly positive. Now the way we're positioning Nigel is it's part of the highest tier of LabVIEW, and we can see clear migration of purchase towards that tier, which has built-in Nigel capability.

Now obviously, the road map has more and more capabilities with Nigel towards autonomous workflows, and that's really what we're most excited about, where we can truly go from a virtual assistant, if you will, to automating test workflows for customers, which will have a meaningful impact on productivity and speed. So more to come in the Nigel area.

Operator

Your next question comes from the line of Amit Mehrotra with UBS.

Amit Mehrotra

Let's try this again. I'm clearly still learning how to use the phone. Sorry about that, gentlemen.

Maybe I could just start. One thing that's very clear is when -- you guys had a lot of curveballs thrown at you in fiscal '26 with the Middle East. And not only did you hit your initial guidance, but you were able to sort of exceed it. And I wonder, as I think about sort of the 2027 and how you guys frame the guidance, I'm assuming there's some level of prudency in how you're thinking about the year, because when I look at your fiscal first quarter organic growth guidance or underlying growth guidance is similar to the full year, when I would think comps get a little bit easier, you're obviously accelerating order growth, there should be maybe some level of accelerating growth. So maybe just talk about that question specifically and how you sort of -- the level of conservatism or prudency that you applied when you formulating the '27 guidance.

Surendralal Karsanbhai

Amit, thank you. This is Lal. Great question and commentary and appreciate your reflection on 2026. Now look, we certainly exited the year with momentum in underlying orders. And I think that as reflected in the backlog gives us confidence to execute 2027. Having said that, it's not all roses out there. The European market, the China market, which has been called out a few times on this call already, are concerning. We are expecting moderate slight improvements in each, but there will be headwinds to underlying growth, I believe, throughout the year.

That's where the conservatism really lies in we continue to be relatively optimistic about the Middle East under a status quo of the conflict. We continue to be optimistic about the United States and areas such as India and Southeast Asia. So that's really the offset that led us to the construct of this guide. But overall, I certainly feel positive as I enter 2027.

Amit Mehrotra

Lal, and just as a follow-up, I noticed that when I look at the buyback, how front-end loaded the buyback is. I think most of it -- the majority of it is actually in the first quarter relative to the full year guide. Can you just talk about what the driving factor is front-loaded so significantly? Maybe it's just a sort of cash flow thing or balance sheet capacity or maybe a reflection of where you think your stock is trading at? Any color on why it's so front-loaded would be appreciated.

Michael Baughman

Sure. Thanks for the question, Amit. We are committed to the $2.5 billion. But as we've talked about in the sort of longer-range capital planning, we do want to create flexibility for acquisitions. So front-loading gave us the opportunity to get the benefit of the lower share count that will support the 2027 guide, while giving us flexibility as the year unfolds to if an opportunity, a bolt-on opportunity comes up, we can do that and still be in a position to deliver '28. So it was really buying us some flexibility. And of course, yes, there's a valuation perspective that we took at the time that we saw some opportunity there, and that has certainly borne out over the course of the last couple of months. So we feel very good about the decision, we feel good about having the flexibility. And if no acquisition candidate comes up, then we will stick to the plan and return the additional $1 billion in the back 9 months of the year.

Operator

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.