Emerson Electric Co. (EMR) Is a Solid Pick Among Diversified Industrial Stocks

Furthermore, Emerson Electric Co. (NYSE:EMR) has hefty cash flows that adequately cover its dividend payments. Its free cash flows enlarged by 115% in the last quarter alone. At the end of the first quarter, its free cash flow stood at $439 million while its dividend payments accounted for $297 million. Its dividends are safe with hefty free cash flows. As an indication of strong cash flows, the company is also working share repurchase program. At the moment, Emerson Electric Co. (NYSE:EMR)’ financial situation is stable.

Competition

Emerson Electric Co. (NYSE:EMR)’s main industry peers are 3M Co (NYSE:MMM) and General Electric Company (NYSE:GE). At present, General Electric and 3M Co (NYSE:MMM) are focusing on enhancing their margins, and both companies are strongly working on restructuring program.  For now, GE is not making massive investments. The company is only focusing on strategic priorities. General Electric Company (NYSE:GE) has a high debt to equity ratio of 1.9, while the industry average stands at 1.1. In the past three years, on average, its revenue growth was a negative 1.9%.

On the other hand, 3M Co (NYSE:MMM)’s has high revenue and earnings growth rates, while its D/E ratio is low at 0.3. 3M has one of best cash conversion rates in the business at around 90-100 percent. 3M is a solid stock with strong financial position. Amidst all this, the stock looks overvalued at present.

Summary

Over the year, Emerson’s stock has shown enjoyed exceptional surge with few shortfalls. At present, year to date, Emerson is trading nearly at its lowest point, which presents an opportunity to initiate a position in the company. Emerson is trading at a discount, with analysts estimating a mean target price of $61.27.

Emerson Electric Co. (NYSE:EMR) has a diversified revenue base and the potential to generate strong cash flows. Additionally, it is anticipating increasing its underlying sales by 2% to 5% in 2013, and achieving an EBIT margin expansion of 10 to 20 basis points. I think Emerson can be a safe pick for long term investors with its solid dividends and steady price appreciation.

The article Emerson Electric Is a Solid Pick Among Diversified Industrial Stocks originally appeared on Fool.com and is written by siraj sarwar.

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