On Wednesday, Deutsche Bank (ETR:DBKGn) showed a positive shift in perspective on Emerson Electric Co. (NYSE:EMR), raising the stock's rating from Hold to Buy and increasing the price target to $138 from the previous $123. The firm's decision came after Emerson demonstrated strong operational performance for two consecutive quarters, which has exceeded expectations and is anticipated to continue.
The analyst from Deutsche Bank noted that Emerson has been on their radar for some time, but concerns over execution and market challenges had previously held back an upgrade. Now, with confidence bolstered by recent performance, they see potential for ongoing positive earnings per share (EPS) momentum and believe their EPS forecast for fiscal year 2025, which is 4% above consensus, may still be conservative.
Emerson's stock currently trades at 20 times next twelve months (NTM) price-to-earnings (P/E), representing a 12% discount compared to the median of its peers. This is a shift from its historical 3% premium over a 10-year median. The upgrade reflects the belief that Emerson's portfolio has improved and the stock is undervalued.
The new price target of $138 is based on a revised target multiple of 22 times the firm's NTM EPS forecast, up from 20 times previously. This adjustment follows the company's second-quarter earnings, suggesting a 23% upside from the current stock price.
Deutsche Bank's upgrade to a Buy rating indicates a strong conviction in Emerson's ability to maintain its beat and raise pattern over the coming quarters, and the raised price target underscores the perceived value and growth potential of the stock.
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