Emerson Electric Co. (NYSE:EMR) Q1 2024 Earnings Call Transcript

Lal Karsanbhai: I’ll let Ram add a little bit of color. But certainly, it’s something that we’re keenly working on. Obviously, the focus was on the commitment on cost. And we do believe alongside management that, that is a — had been and is an evident opportunity. Having said that, we are — I’m not going to suggest that we’re 3 or maybe even 6 months away to come out publicly with some sales ideas, but we’re certainly working on customer-specific ideas on sales synergies. Ram and I and Ritu have held a number of customer meetings jointly and thinking through opportunities that we have across the Emerson portfolio as it comes in with NI. Ram?

Ram Krishnan: Yes. And just the 2 end markets are clearly going to be EV batteries where — on a holistic basis where we play on the production automation and NI plays on the validation and test systems on the R&D side and then similarly in semiconductors, 2 markets where I think there’s enough customer overlap and a joint capability that provides meaningful value to our customers from R&D through validation, through production is where we will see the opportunities. We’re working it. We’re not ready yet to commit and quantify the sales synergies, but these are certainly in focus, and we’re working through the process.

Deane Dray: Great. And then just second question, I joined a bit late, so I apologize if you’ve covered this, on China. A lot of anxiety about the macro there. It doesn’t look like you’re positioned in the areas that — like real estate that are having the most pressure. But just what are the expectations? What are the opportunities over the near term?

Lal Karsanbhai: Yes. We grew high single digits in the quarter in China sales. We expect in that high — mid- to high single digits for the year. Our business continues to be relatively robust, again, aligned, Deane, to those same macro secular drivers that we’re seeing globally. It’s no different in China. Perhaps the end markets are slightly different, specialty chemicals and a few other things. But our position is very strong. Our regionalization strategy has been very strong. And we expect to continue to win in China as we go through the year. Ram, anything?

Ram Krishnan: Yes. No, you said it. I think in our core process hybrid business, power and chemical will drive the growth. I mean, obviously, what’s not in the underlying numbers is test and measurement. Test and measurement is consistent with discrete. Off to a tougher start in China, but expecting a second half recovery, consistent with what we’re seeing with the discrete business.

Deane Dray: Thank you.

Operator: The next question comes from Joe O’Dea from Wells Fargo. Please go ahead.

Joe O’Dea: Hi, good morning. Just in terms of the remaining 9 months of the year and the guide, obviously off to a strong start. But organically, any change in how you’re thinking about that versus 3 months ago? It seems like not much change in what’s implied in the organic growth rate. If anything, I think the math would suggest the margins could have ticked down a touch. But I just want to make sure, is the message that the last 9 months of the year, no real change in kind of the organic side of the expectations?

Lal Karsanbhai: No. We remain Joe, very positive on the environment. Obviously, we couple that with the strong execution by our teams. But in terms of the organic outlook, no change really.

Joe O’Dea: Okay. And then related to the strength in measurement and analytical, I understand some commentary on easier comps, but the stacks did improve sequentially. And so as it relates to supply chain, where are you on a normalization? You know, the orders up high single digits is a pretty encouraging number. Are you at a point now where there’s still some pent-up backlog to ship out? Or do you view it as having gotten pretty close to more normalization at this point?

Ram Krishnan: Yes, the supply chains have normalized. So in terms of our ability to procure electronics and load factories and drive production out of factories, we feel that’s normalized. Now certainly, in the measurement and analytical business, there is some overdue backlog that will ship through Q2. The easier comparisons and our ability to ship that backlog is what drove the 28% in Q1. You’ll see that in the measurement and analytical business. That’s the last business normalizing from a supply chain perspective. But the demand environment for that business still remains very healthy with orders up in the high single digits.

Joe O’Dea: Got it. Thank you.

Operator: And the next question comes from Brett Linzey of Mizuho. Please go ahead.

Brett Linzey: Hey, good morning. Thank you. Wanted to come back to the project funnel. I was hoping you might be able to give some color on the profitability of the growth platforms. And is there anything different or unique about the aftermarket or service attachment rates and the way those deals were structured and Emerson’s wallet share there?