Emerson Accelerated Sales Growth, Raised Full-Year Outlook
Adjusted segment EBITA margin widened 140 basis points to 28.5% in the third quarter.
Emerson Electric Co. (EMR), the industrial technology and software company, accelerated third-quarter sales growth and lifted its fiscal 2026 outlook as profit margins recovered.
Net sales rose 7% to $4.873 billion, strengthening from growth of 3% in the second quarter and 4% in the first. Underlying sales growth accelerated to 6% from 0.5% and 2%, respectively, while underlying orders increased 7%, up from 5% in the preceding quarter.
GAAP earnings rose 24% to $1.28 a share, and adjusted earnings increased 13% to $1.71 a share. The results topped Emerson's prior forecasts for roughly 5.5% reported sales growth, about 5% underlying growth and adjusted earnings of $1.65 to $1.70 a share.
Software & Systems led the expansion as sales climbed 11% to $1.644 billion. Test & Measurement grew 23%, compared with 7% growth at Control Systems & Software, while Intelligent Devices sales increased 6% and Safety & Productivity grew 3%. Sales rose 8% in both the Americas and Asia, Middle East & Africa, while Europe declined 1%.
Test & Measurement produced the strongest profit improvement, with adjusted EBITA rising to $132 million from $81 million and margin widening to 29.6% from 22.4%. Intelligent Devices' adjusted EBITA margin expanded 240 basis points to 27.9%. Control Systems & Software margin narrowed 260 basis points to 32.6%, leaving the combined Software & Systems margin down 30 basis points.
Cash generation also rebounded. Operating cash flow rose 34% to $1.425 billion and free cash flow climbed 36% to $1.323 billion after both measures declined in each of the previous two quarters. Emerson now expects fiscal 2026 net-sales growth of about 5%, underlying growth of roughly 3.5% and adjusted earnings of about $6.55 a share. It expects operating cash flow of about $4.1 billion and free cash flow of roughly $3.6 billion.
The quarter included an $82 million tariff-refund benefit, equivalent to $0.11 a share, while restructuring and related costs more than doubled to $99 million. Full-year reported and underlying sales forecasts remained below Emerson's initial outlook, though adjusted earnings reached the upper bound of the company's original range.