Emerson Electric Co. (NYSE:EMR)

Over the analyzed period from 2014 to 2019, the net operating profit after taxes (NOPAT) exhibited variability with evident fluctuations rather than steady growth or decline. Starting at 2,212 million USD in 2014, NOPAT increased sharply in 2015 to 2,871 million USD, then declined to 1,731 million USD in 2016. Subsequent years showed a moderate recovery, reaching 2,461 million USD by 2019, though this level still falls short of the 2015 peak.

The cost of capital percentage experienced minor fluctuations, moving between approximately 15.9% and 16.41%. This generally stable cost of capital suggests that the company's weighted average cost of financing did not undergo significant structural changes across these years. The highest value recorded was 16.41% in 2018, followed by a slight decline to 16.1% in 2019.

Invested capital demonstrated a downward trend from 2014 through 2017, decreasing from 17,628 million USD to 15,181 million USD. This decline indicates a reduction in the amount of capital employed in the business during those years. However, in 2018 and 2019, invested capital showed a mild recovery, increasing to 15,617 million USD and 16,266 million USD, respectively, but remaining below the 2014 level.

The economic profit, calculated as the net operating profit after taxes minus the cost of capital incurred by invested capital, was negative for most of the period, except in 2015 where the company achieved a positive figure of 277 million USD. The negative economic profit in 2014, 2016, 2017, 2018, and 2019 indicates that the company did not generate returns exceeding its cost of capital in those years. Notably, the magnitude of the negative economic profit decreased from -591 million USD in 2014 to -158 million USD in 2019, suggesting a gradual improvement in value creation, although it remains below zero.

In summary, the financial indicators reveal a company undergoing fluctuating operational performance with some recovery in profitability and capital deployment following declines in mid-period years. Despite improvements in economic profit towards the end of the period, the overall picture signals challenges in consistently generating returns above the cost of capital throughout these six years.

The analysis of the financial data for the period from September 30, 2014, to September 30, 2019, reveals notable fluctuations in key profitability metrics.

Net Earnings Common Stockholders

The net earnings attributable to common stockholders demonstrate variability over the periods considered. Initially, there was an increase from 2,147 million USD in 2014 to a peak of 2,710 million USD in 2015. This was followed by a significant decrease to 1,635 million USD in 2016 and a slight further reduction to 1,518 million USD in 2017. Subsequently, the earnings recovered, rising to 2,203 million USD in 2018 and marginally improving to 2,306 million USD by 2019. This pattern suggests volatility in profitability, with a notable dip in the middle years before recovery in the latter two years.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a similar trend to net earnings, with an increase from 2,212 million USD in 2014 to 2,871 million USD in 2015, followed by a substantial decrease to 1,731 million USD in 2016. Unlike net earnings, NOPAT stabilizes somewhat in 2017 with a slight increase to 1,776 million USD. In the subsequent years, NOPAT rises consistently, reaching 2,124 million USD in 2018 and 2,461 million USD in 2019. This trend indicates a recovery in operating profitability after a period of decline, with steady improvements in the final two years.

Overall, both net earnings and NOPAT experienced a peak in 2015, followed by a decline over the next one to two years, and then a recovery phase from 2017 onward. The recovery in NOPAT appears somewhat stronger and more consistent than that in net earnings. These trends highlight periods of operational challenges and subsequent improvement in financial performance.

Income Tax Expense

The income tax expense demonstrated a fluctuating downward trend over the six-year period. Starting at $1,164 million in 2014, it increased to a peak of $1,428 million in 2015. However, from 2015 onwards, the figure declined significantly to $697 million in 2016 and further decreased to $660 million in 2017. The downward trend continued, reaching a low of $443 million in 2018, before showing a modest increase to $531 million in 2019. This pattern suggests variability in taxable income or changes in tax rates, with a notable reduction after 2015 and slight recovery toward 2019.

Cash Operating Taxes

Cash operating taxes followed a similar overall declining trajectory with some variation. Beginning at $1,394 million in 2014, the amount rose to $1,525 million in 2015, indicating higher cash tax payments that year. Subsequently, there was a sharp decline to $782 million in 2016 and a marginal decrease to $766 million in 2017. The downward movement persisted, with taxes dropping to $737 million in 2018 and then declining further to $619 million in 2019. This trend mirrors the reduction observed in income tax expense, possibly reflecting lower taxable income or effective tax management strategies resulting in decreased cash tax obligations over time.

Total Reported Debt & Leases

The total reported debt and leases exhibited a non-linear trend over the analyzed periods. It increased from 6,834 million USD in 2014 to peak at 7,624 million USD in 2015, followed by a reduction to 5,137 million USD in 2017. Subsequently, the amount rose again, reaching 6,191 million USD by 2019. This pattern suggests fluctuations in debt management, with a notable decrease in the middle period before a moderate rebound.

Common Stockholders’ Equity

Common stockholders’ equity showed a general decline from 10,119 million USD in 2014 to 7,568 million USD in 2016. Thereafter, it increased to 8,947 million USD in 2018, before descending again to 8,233 million USD in 2019. This series of movements indicates some volatility but overall a downward pressure on equity levels during the period.

Invested Capital

Invested capital steadily decreased from 17,628 million USD in 2014 to a low of 15,181 million USD in 2017. After 2017, it gradually increased to 16,266 million USD by 2019. The downward trend in the initial years followed by a recovery suggests adjustments in the company's capital investment strategy or asset base.

Overall Observations

The data reflects a period of financial adjustment, with both liabilities and equity experiencing declines and recoveries at different times. The decrease in invested capital up until 2017, coupled with reduced debt levels in the same period, could indicate an active effort to deleverage or optimize capital structure. Subsequently, the increases in debt and invested capital alongside fluctuating equity values imply dynamic financial management responsive to changing conditions or strategic priorities.

The financial data reveal several notable trends spanning from 2014 to 2019. The economic profit demonstrates a fluctuating yet persistently negative pattern, with a solitary positive figure recorded in 2015. Economic profit started at a loss of 591 million US dollars in 2014, improved remarkably in 2015 to a profit of 277 million, but then reverted to negative territory in the following years, reaching a loss of 158 million by 2019. Despite this improvement, the company did not sustain consistent economic profit gains.

Invested capital generally experienced a downward trend initially, declining from 17,628 million US dollars in 2014 to a low of 15,181 million in 2017. Subsequently, there was a modest recovery through 2018 and 2019, ending at 16,266 million. This pattern suggests some capital divestiture or efficiency measures leading to a decrease in invested capital, followed by stabilization or reinvestment efforts in the latter periods.

The economic spread ratio, which reflects the difference between the return on invested capital and the cost of capital, mirrors the fluctuations observed in economic profit. Beginning with a negative spread of -3.35% in 2014, it rose to a positive 1.6% in 2015, then deteriorated again into negative figures through the rest of the period, improving gradually from -4.78% in 2016 to -0.97% in 2019. This trend indicates ongoing challenges in generating returns exceeding the cost of capital, though there is a trend toward reducing this deficit in more recent years.

Economic Profit

Shows volatility with mostly negative values except for one positive year in 2015. There is an overall trend toward reducing losses by 2019.

Invested Capital

Declined significantly over the first three years, followed by a slight rebound, indicating possible restructuring or capital optimization measures.

Economic Spread Ratio

Negative in the majority of years, reflecting returns below the cost of capital, though the magnitude of negativity decreases by 2019, suggesting improved efficiency or cost control.

In summary, while the company struggled with profitability as measured by economic profit and economic spread ratio for most of the period, there are signs of recovery and improved capital efficiency toward the end of the timeline. Continued efforts to enhance return on invested capital and control costs appear to be critical for achieving sustained economic profit.

Economic Profit

The economic profit experienced considerable fluctuations throughout the periods. Starting with a negative figure of -591 million US dollars in 2014, it rose to a positive profit of 277 million in 2015. However, the following years saw a decline back into negative territory, with -790 million in 2016 and -685 million in 2017. Although losses persisted, there was a gradual improvement after 2017, with economic profit losses narrowing from -439 million in 2018 to -158 million in 2019.

Net Sales

Net sales demonstrated a downward trend from 2014 through 2016, falling significantly from 24,537 million US dollars in 2014 to 14,522 million in 2016. The subsequent years saw a recovery, with sales increasing steadily to 18,372 million US dollars by 2019. However, the net sales had not reached the level observed in 2014 by the end of the period analysed.

Economic Profit Margin

The economic profit margin mirrored the trend of economic profit, starting negative at -2.41% in 2014, turning positive at 1.24% in 2015, then returning to negative values from 2016 onward. This margin experienced the lowest point at -5.44% in 2016. Subsequent years showed modest recovery, with margins improving to -0.86% in 2019, indicating some movement towards profitability but still remaining marginally negative.

Summary

Overall, the financial data reveals volatility in profitability measures, reflecting challenges in maintaining consistent economic profit despite fluctuations in net sales. Economic profit and margin notably peaked positively in 2015 but faced significant declines the following year. The improvement in economic profit losses and tightening of the economic profit margin after 2017 suggest some recovery, although profitability had not fully normalized by 2019. Net sales followed a similar pattern, declining sharply before recovering moderately, suggesting that underlying revenue dynamics significantly influenced profitability trends.