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Emerson shares target raised at Loop Capital on conviction in multiple-expansion story

EditorRachael Rajan
Published 02/12/2024, 13:34
EMR
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On Monday, Loop Capital increased its price target for Emerson (NYSE:EMR) to $155 from the previous $130 while maintaining a Buy rating on the stock.

The firm's analyst cited several reasons for the heightened optimism, including slightly higher estimates and stronger conviction in the company's potential for multiple expansion, driven by clear capital deployment plans.

The analyst highlighted Emerson's improved profitability, which has been supported by strategic portfolio actions. The company's pro forma gross margin (GM) is expected to be 54% compared to the fiscal year 2021 GM of 41.5% and its peer Rockwell Automation's (NYSE:NYSE:ROK) GM of 39% during fiscal year 2024.

Emerson's Enterprise Operations Platform (EOP) approach was also noted as a significant opportunity. Signs of this strategy were evident at last year's 'Exchange Immerse' event, which showcased the integration depth between Emerson and AspenTech and the compelling value proposition of adopting a software-defined approach to data and operations.

The firm believes that Emerson's strategy to centralize field data into a single data pool and control suite could lead to substantial efficiency gains for customers, compared to the traditional isolated approach. The analyst likened this shift to the aerospace industry's transition from analog to 'fly-by-wire' technology or a 'Manufacture-by-Wire' approach in manufacturing.

"Aided by portfolio changes, exposure to secular tailwinds, robust FCF and the aforementioned software-centric approach, we see further upside opportunity in EMR shares," the analysts added.

In other recent news, Emerson Electric Co. has been making headlines with its robust financial performance and strategic developments. The company reported a 6% increase in underlying sales and a 24% rise in adjusted earnings per share for the fiscal year 2024. Additionally, Emerson's fiscal year 2025 guidance exceeded market expectations, ranging from $5.85 to $6.05 per share.

Emerson has proposed to acquire the remaining shares of Aspen Technology (NASDAQ:AZPN) and is considering the divestiture of its Safety & Productivity business. These moves are expected to strengthen Emerson's focus on automation, potentially leading to beneficial synergies, particularly with the Aspen Technology deal. However, KeyBanc suggested that a higher offer might be necessary for the Aspen Technology acquisition.

Furthermore, Emerson plans to repurchase $2 billion worth of its own shares in fiscal year 2025.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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