Emerson Targets 5% Fiscal 2027 Sales Growth as Q4 Orders Rise 14%

Emerson (EMR) forecast about 5% sales growth for fiscal 2027 after ending 2026 with stronger demand across all business groups and regions. Fourth-quarter underlying orders increased 14%, while adjusted earnings per share rose 15%, supported by higher volume, favorable segment mix and improved operating performance.

For fiscal 2027, the automation company expects both GAAP and underlying sales to grow about 5%. Adjusted segment EBITA margin is projected at approximately 29%, with adjusted EPS of about $7.25 and GAAP EPS of roughly $5.70. Free cash flow is expected to reach $3.8 billion to $3.9 billion, representing a margin above 19%.

Emerson also plans to return approximately $3.8 billion to shareholders during the year, comprising about $2.5 billion of share repurchases and roughly $1.3 billion of dividends. The plan includes a $0.16-per-share dividend increase, or 7% year over year.

Q4 sales and margins advance

Fourth-quarter net sales rose 7% to $5.20 billion, with underlying sales also up 7%. Volume contributed four percentage points to underlying growth and pricing added three points. Backlog excluding AspenTech was $8.2 billion, 11% higher than a year earlier.

Adjusted segment EBITA increased to $1.51 billion from $1.33 billion, while the adjusted segment EBITA margin expanded 160 basis points to 29.1%. Emerson said price-cost performance and cost reductions more than offset inflation. Operational performance contributed $0.25 to the year-over-year increase in adjusted EPS.

GAAP EPS was $1.33, compared with $1.07 a year earlier. Adjusted EPS increased to $1.86 from $1.62. Quarterly free cash flow rose 9% to $916 million, with the free cash flow margin edging up to 17.6% from 17.4%.

Underlying orders grew across every business group, led by an 18% increase in Software & Systems and a 13% rise in Intelligent Devices. Orders increased in all regions, including growth of 15% in North America and 42% in the Middle East. Emerson recorded approximately $575 million of project wins during the quarter, about 75% of which came from its designated growth verticals.

The company’s project funnel ended the quarter at $13 billion, up $600 million sequentially. Projects tied to growth verticals accounted for about $8 billion of the total, an increase of $500 million from the previous quarter.

Software & Systems leads business-group growth

Software & Systems generated fourth-quarter sales of $1.71 billion and underlying growth of 14%. Test & Measurement sales increased 15% on an underlying basis, while Control Systems & Software rose 14%. Emerson attributed the group’s performance to activity in the power, liquefied natural gas and semiconductor verticals. Adjusted EBITA margin for the group was 32.3%, and annual contract value increased 10.1% to $1.7 billion.

Intelligent Devices reported $2.92 billion of sales, with underlying growth of 4% and an adjusted EBITA margin of 28.4%. Growth in North America and the Middle East, led by power, LNG and upstream and midstream gas markets, was partly offset by weakness in Europe and China.

Safety & Productivity posted sales of $573 million, underlying growth of 2% and an adjusted EBITA margin of 22.9%. Electrical products and U.S. industrial activity supported the business, while Europe remained weak.

Regionally, fourth-quarter underlying sales increased 9% in the Americas, including 11% growth in the United States. Sales rose 1% in Europe and 7% across Asia, the Middle East and Africa, including a 19% increase in the Middle East and Africa.

Full-year adjusted EPS rises 10%

For fiscal 2026, net sales increased to $18.98 billion from $18.02 billion. GAAP sales grew 5%, while underlying sales rose 4%, including a three-percentage-point contribution from pricing.

Full-year adjusted segment EBITA reached $5.36 billion, up from $4.98 billion, and the corresponding margin expanded 60 basis points to 28.2%. GAAP EPS was $4.79, while adjusted EPS increased 10% to $6.59. Free cash flow rose 9% to $3.54 billion, lifting the free cash flow margin to 18.6% from 18.0%.

Growth verticals underpin the 2027 outlook

Emerson expects fiscal 2027 growth to be led by the United States, India, and the Middle East and Africa, as well as continued activity in power, LNG, life sciences, semiconductors, and aerospace and defense.

Software & Systems underlying sales are forecast to grow 7% to 8% for the full year, with high-single-digit growth expected in both Test & Measurement and Control Systems & Software. Annual contract value is expected to increase about 10%. Intelligent Devices underlying sales are projected to rise approximately 4%, while Safety & Productivity is expected to grow 3% to 4%.

For the first quarter, Emerson expects GAAP and underlying sales growth of about 5%, an adjusted segment EBITA margin near 28%, GAAP EPS of $1.19 to $1.23 and adjusted EPS of $1.58 to $1.62.

Management said the company remains on track toward its fiscal 2028 targets, including $21 billion of net sales, a 30% adjusted segment EBITA margin, adjusted EPS of $8.00 and a 20% free cash flow margin.

The outlook assumes the effects of the Middle East conflict remain contained within the region. Emerson also identified continued weakness in Europe and China as operating constraints. Other uncertainties cited in the presentation include global conflicts, economic and currency conditions, market demand, tariffs, inflation, cybersecurity, competition and technological change.