Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Emerson Electric Co., profitability ratios
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
The profitability profile between 2014 and 2019 is characterized by stable gross margins and a general improvement in bottom-line efficiency, despite notable fluctuations in return metrics.
- Profit Margin Trends
- Gross profit margins remained consistently strong, oscillating within a narrow range between 40.57% and 43.12%, suggesting a stable relationship between revenue and the direct costs of production. Operating profit margins saw a significant spike from 14.44% in 2014 to a peak of 19.42% in 2015, followed by a period of stabilization between 16.23% and 17.24% from 2016 through 2019. Net profit margins demonstrated a positive long-term trend, increasing from 8.75% in 2014 to 12.55% by 2019, indicating an improvement in the conversion of sales into actual profit.
- Return on Investment Performance
- Return on equity (ROE) exhibited substantial volatility, reaching a high of 33.54% in 2015 and a low of 17.41% in 2017, before rebounding to 28.01% by 2019. Return on assets (ROA) mirrored this volatility, peaking at 12.27% in 2015 and dipping to 7.52% in 2016, then recovering to 11.25% by the end of the period. The consistent spread between ROE and ROA highlights the role of financial leverage in enhancing returns for shareholders.
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Return on Sales
Return on Investment
Gross Profit Margin
Emerson Electric Co., gross profit margin calculation, comparison to benchmarks
| Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Gross profit | 7,815) | 7,460) | 6,404) | 6,262) | 9,048) | 10,158) | |
| Net sales | 18,372) | 17,408) | 15,264) | 14,522) | 22,304) | 24,537) | |
| Profitability Ratio | |||||||
| Gross profit margin1 | 42.54% | 42.85% | 41.95% | 43.12% | 40.57% | 41.40% | |
| Benchmarks | |||||||
| Gross Profit Margin, Competitors2 | |||||||
| Boeing Co. | — | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
1 2019 Calculation
Gross profit margin = 100 × Gross profit ÷ Net sales
= 100 × 7,815 ÷ 18,372 = 42.54%
2 Click competitor name to see calculations.
Between 2014 and 2019, a significant contraction in operational scale occurred, followed by a period of gradual recovery. Net sales experienced a sharp decline from US$ 24,537 million in 2014 to a low of US$ 14,522 million in 2016. Gross profit followed a parallel trajectory, falling from US$ 10,158 million in 2014 to US$ 6,262 million in 2016. From 2017 onward, both metrics showed a consistent upward trend, with net sales reaching US$ 18,372 million and gross profit rising to US$ 7,815 million by September 30, 2019.
- Gross Profit Margin Resilience
- Despite the substantial reduction in total revenue and absolute profit between 2014 and 2016, the gross profit margin remained remarkably stable. The margin fluctuated within a narrow range of approximately 254 basis points, moving from 41.40% in 2014 to a peak of 43.12% in 2016.
- Inverse Relationship Between Volume and Efficiency
- A notable observation is the increase in the gross profit margin during the year of lowest net sales (2016). This divergence suggests that the decrease in revenue was not driven by pricing pressures or increased production costs, but likely resulted from a strategic shift, such as the divestiture of low-margin business units or a transition toward higher-value product mixes.
- Post-2016 Margin Stabilization
- Following the 2016 peak, the gross profit margin entered a period of stabilization. The ratio moderated slightly to 41.95% in 2017, climbed to 42.85% in 2018, and concluded the period at 42.54% in 2019. This indicates a consistent ability to maintain cost structures relative to sales as the company scaled its operations back upward.
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Operating Profit Margin
Emerson Electric Co., operating profit margin calculation, comparison to benchmarks
| Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Earnings from continuing operations before interest and income taxes | 3,033) | 2,826) | 2,500) | 2,504) | 4,332) | 3,542) | |
| Net sales | 18,372) | 17,408) | 15,264) | 14,522) | 22,304) | 24,537) | |
| Profitability Ratio | |||||||
| Operating profit margin1 | 16.51% | 16.23% | 16.38% | 17.24% | 19.42% | 14.44% | |
| Benchmarks | |||||||
| Operating Profit Margin, Competitors2 | |||||||
| Boeing Co. | — | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
1 2019 Calculation
Operating profit margin = 100 × Earnings from continuing operations before interest and income taxes ÷ Net sales
= 100 × 3,033 ÷ 18,372 = 16.51%
2 Click competitor name to see calculations.
Analysis of the operating performance between 2014 and 2019 reveals a period of significant volatility in revenue followed by a stabilization of operational efficiency.
- Net Sales Performance
- A substantial contraction in net sales is evident, most notably between 2015 and 2016, when revenue decreased from 22,304 million USD to 14,522 million USD. Following this decline, a consistent recovery trend was observed from 2017 through 2019, with net sales increasing annually to reach 18,372 million USD.
- Operating Profit Trends
- Earnings from continuing operations before interest and income taxes reached a peak of 4,332 million USD in 2015. Despite the sharp drop in net sales in 2016, operating earnings remained relatively resilient, stabilizing at approximately 2,500 million USD in 2016 and 2017 before trending upward to 3,033 million USD by September 30, 2019.
- Operating Profit Margin Analysis
- The operating profit margin experienced a significant expansion from 14.44% in 2014 to a peak of 19.42% in 2015. A subsequent gradual correction occurred, with the margin fluctuating within a narrow band between 16.23% and 17.24% from 2016 to 2019. The maintenance of a margin consistently higher than the 2014 baseline, despite the significant reduction in total sales volume during the mid-period, suggests a shift toward a more efficient cost structure or a more profitable product mix.
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Net Profit Margin
Emerson Electric Co., net profit margin calculation, comparison to benchmarks
| Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings common stockholders | 2,306) | 2,203) | 1,518) | 1,635) | 2,710) | 2,147) | |
| Net sales | 18,372) | 17,408) | 15,264) | 14,522) | 22,304) | 24,537) | |
| Profitability Ratio | |||||||
| Net profit margin1 | 12.55% | 12.66% | 9.94% | 11.26% | 12.15% | 8.75% | |
| Benchmarks | |||||||
| Net Profit Margin, Competitors2 | |||||||
| Boeing Co. | — | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
1 2019 Calculation
Net profit margin = 100 × Net earnings common stockholders ÷ Net sales
= 100 × 2,306 ÷ 18,372 = 12.55%
2 Click competitor name to see calculations.
The financial performance between 2014 and 2019 is characterized by a significant contraction and subsequent recovery of the revenue base, accompanied by a general expansion of profitability margins. While net sales experienced a sharp decline mid-period, the net profit margin transitioned from a lower baseline to a higher, more stable plateau.
- Net Profit Margin Analysis
- The net profit margin exhibited an upward trajectory from 8.75% in 2014 to 12.15% in 2015. Despite a temporary decline to 9.94% by 2017, the margin recovered to 12.66% in 2018 and remained consistent at 12.55% in 2019. This indicates an overall improvement in operational efficiency and a higher capacity to convert revenue into net income over the analyzed period.
- Revenue and Earnings Volatility
- A substantial decrease in net sales occurred between 2015 and 2016, with figures dropping from 22,304 million to 14,522 million. This contraction was mirrored in net earnings, which fell from 2,710 million in 2015 to 1,635 million in 2016. The maintenance of a double-digit profit margin during this period of revenue decline suggests a strategic shift toward higher-margin business activities or the divestment of lower-performing assets.
- Growth and Stabilization Trends
- From 2017 onward, a consistent recovery trend is observed. Net sales grew steadily from 15,264 million in 2017 to 18,372 million in 2019, while net earnings rose from 1,518 million to 2,306 million. The synchronization of increasing sales and a stabilized net profit margin above 12% suggests that the business achieved a more profitable and sustainable operational scale by the end of the period.
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Return on Equity (ROE)
Emerson Electric Co., ROE calculation, comparison to benchmarks
| Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings common stockholders | 2,306) | 2,203) | 1,518) | 1,635) | 2,710) | 2,147) | |
| Common stockholders’ equity | 8,233) | 8,947) | 8,718) | 7,568) | 8,081) | 10,119) | |
| Profitability Ratio | |||||||
| ROE1 | 28.01% | 24.62% | 17.41% | 21.60% | 33.54% | 21.22% | |
| Benchmarks | |||||||
| ROE, Competitors2 | |||||||
| Boeing Co. | — | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
1 2019 Calculation
ROE = 100 × Net earnings common stockholders ÷ Common stockholders’ equity
= 100 × 2,306 ÷ 8,233 = 28.01%
2 Click competitor name to see calculations.
The analysis of profitability metrics between 2014 and 2019 reveals a period of volatility followed by a recovery phase in the return on equity (ROE). The ROE experienced a significant peak in 2015 before declining to a low point in 2017, subsequently rebounding over the following two fiscal years.
- Net Earnings Volatility
- Net earnings for common stockholders exhibited significant fluctuation, peaking at 2,710 million US$ in 2015 before falling to a period low of 1,518 million US$ in 2017. A consistent upward trend followed this trough, with earnings rising to 2,306 million US$ by September 30, 2019.
- Equity Base Dynamics
- Common stockholders' equity decreased substantially from 10,119 million US$ in 2014 to 7,568 million US$ in 2016. While a moderate recovery occurred, peaking at 8,947 million US$ in 2018, the equity base contracted again to 8,233 million US$ by the end of the 2019 period.
- Return on Equity (ROE) Correlation
- The ROE reached its maximum of 33.54% in 2015, driven by the combination of peaked net earnings and a reduced equity base. The ratio then contracted to 17.41% in 2017, corresponding with the lowest earnings recorded during the period. A recovery trend is observed from 2017 through 2019, where the ROE climbed to 28.01%, supported by increasing net earnings and a reduction in equity in the final fiscal year.
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Return on Assets (ROA)
Emerson Electric Co., ROA calculation, comparison to benchmarks
| Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | Sep 30, 2014 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings common stockholders | 2,306) | 2,203) | 1,518) | 1,635) | 2,710) | 2,147) | |
| Total assets | 20,497) | 20,390) | 19,589) | 21,743) | 22,088) | 24,177) | |
| Profitability Ratio | |||||||
| ROA1 | 11.25% | 10.80% | 7.75% | 7.52% | 12.27% | 8.88% | |
| Benchmarks | |||||||
| ROA, Competitors2 | |||||||
| Boeing Co. | — | — | — | — | — | — | |
| Caterpillar Inc. | — | — | — | — | — | — | |
| Eaton Corp. plc | — | — | — | — | — | — | |
| GE Aerospace | — | — | — | — | — | — | |
| Honeywell International Inc. | — | — | — | — | — | — | |
| Lockheed Martin Corp. | — | — | — | — | — | — | |
| RTX Corp. | — | — | — | — | — | — | |
Based on: 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30), 10-K (reporting date: 2014-09-30).
1 2019 Calculation
ROA = 100 × Net earnings common stockholders ÷ Total assets
= 100 × 2,306 ÷ 20,497 = 11.25%
2 Click competitor name to see calculations.
The financial performance from 2014 to 2019 exhibits a cyclical pattern of profitability, characterized by a significant mid-period contraction followed by a robust recovery. Efficiency in asset utilization improved toward the end of the analyzed timeframe, as the company managed to increase returns on a leaner asset base compared to 2014 levels.
- Return on Assets (ROA) Trend
- ROA experienced substantial volatility, peaking at 12.27% in 2015 before dropping sharply to a period low of 7.52% in 2016. A steady upward trajectory is observed from 2017 onward, with the ratio climbing to 10.80% in 2018 and reaching 11.25% by 2019. This recovery indicates a restored and improving ability to generate profit from the company's total assets.
- Net Earnings Performance
- Net earnings for common stockholders fluctuated significantly throughout the period. After an initial increase from 2,147 million US$ in 2014 to a peak of 2,710 million US$ in 2015, a marked decline occurred, with earnings falling to 1,518 million US$ by 2017. A strong rebound followed, with earnings recovering to 2,306 million US$ in 2019, mirroring the recovery seen in the ROA.
- Asset Base Correlation
- Total assets showed a consistent downward trend between 2014 and 2017, decreasing from 24,177 million US$ to 19,589 million US$. The subsequent stabilization of assets around 20,497 million US$ by 2019, combined with rising net earnings, suggests an improvement in operational efficiency. The reduction in the overall asset base likely contributed to the expansion of the ROA in the final two years of the period.
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