EMR - Earnings call transcript Q2 2021

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Operator

Good day. And welcome to the Emerson Second Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to Investor conference Relations. like Lilly, to now of Head would turn over the Pete I Please ahead, go sir.

Pete Lilly

Today, President Good morning. Karsanbhai; Officer, quarter call. Frank second us Senior for joined And thank and you earnings for Executive Vice and Chief Officer, Chief Executive and joining President Emerson’s I’m Lal website. by Financial Dellaquila; I the follow our to discussion with join encourage accompanying available Vice presentation, Please along and is Operating Chief slide President Executive on you and Officer, Krishnan. which slide two. Ram me the on conference

this As which and of may uncertainty. always, a risk present statements, include some business continued forward-looking degree

Turning to Social Emerson Corporate Responsibility that slide report for highlight now. three, like briefly many been a to has publishing years I’d

our Social to global towards. are by Report We have framework, and our stakeholders. month I solutions, is to is our and efforts environmental renamed Governance it sustainability and various internal sustainability and highlight momentum of and with the document of with review greening sustainability our products the excited published. our Emerson, the standards goals, that particular, our enablement customers’ encourage working journeys organization our Emerson, efforts, when Environmental captures and In report collaboration through sustainability next all Emerson Emerson the of you

of tremendously engagement customers, users, and transformation, am of is pandemic, Exchange leaders. Exchange the series, many digital limitations Emerson Despite and with to as which virtual Please going turn hybrid virtual for such turn I to sustainability, time the from remarks. very interact event briefly of More topics. technology details Emerson five likely place this with framework other is user finalized. we a recent through Lal will Due slide chance the Emerson to reach call success available Lal. had follow to Over other obvious now March. Karsanbhai format, to Please opening next forward. adopting the always, for a questions. the to our experts This industry popular slide Exchange on technology to to format the I turn took over Emerson the As our for four. I’d event. already you, and will mention like base dramatically a November expanded virtual customer focusing the and Emerson for be in-person place successful

Lal Karsanbhai

and it I like passing Pete, you, to a Frank. on good Thank say morning, everyone. few things to would before

and markets and building, by both now large our on across of it today more everyone. ago. critical was Thank over execution, as number of as done was team, over our for Momentum to expands, which broadly one our than a based customer cycle it’s Well investments, on three months. building make enable expansion technology us class top three across tremendous was agility you profit things. leverage strong required was and that The last over global XX% the a Firstly, platforms, delivered our three will relevance. to the creativity hurdles months result strong number quarter. and across differentiation is a operations. This jumped we This

Lastly, thank for you to first the you during me energy and for passion. teams, my XX days your thank welcoming and

that we’re the every the You energize me and journey day on in journey together. taking

your but by Turley, last, welcome XX Board David, David elected concluded for service many I whose And contributions. not years. Secondly, least, would I Jim to extend who -- you, you. to Emerson. and after to about would Board. our Jim to forward future and Emerson’s yesterday is the the Board recognize alongside Thank like of stepped a to entire Directors than of today I like who Farr, warm Nonexecutive Frank, Jim passionate people, Independent is Chair. new a qualified to Director be over look highly culture working more extremely

Frank Dellaquila

orders that at the increased and for and March Solutions Thank Lal reset growth. X% across operating the robust Within you, lines in sales driving for referred March. prior orders for program financial in with was versus realized orders We and the from all three-months improvement towards both growth that XX% continues midpoint growth being significantly segment sales, of of The actions like while growth most of and The of continues strengthening ahead and margin our performance in of expectations we a Automation ago take are $X.XX our business two expectations strong geographies drove and in X% for ahead sales almost representing and and several I’d that that $X.XX, basis growth benefits the Residential & as end recovery the thank combined steady end X% slides. highlights you cost you strong experience of today. orders, at to to benefits Adjusted demand to morning, XX.X%. implemented quarter. the markets with strengthened significantly Good Demand strong year. number underlying XXX underlying Solutions EPS us second and Commercial Lal. guidance with XX% years of of had quarter its the of the through the over all high everybody, at for growth results quarter joining EBIT cost and growth reset the next planned, points our adjusted trailing through its XX%

XX%. flow strong, with conversion net XXX% free up up to cash XX% nearly of year-over-year earnings. cash flow continues be This represents Additionally,

in of the next for comments initiated us EPS. actions, million with Please to We continue adjusted adding the bulk of point, $XX $X.XX would additional EPS. remaining to operational performance the EPS very turn elements the on quarter strong if slide The to the we cost restructuring quarter. execute behind you at this was in on bridge our of it reset the

was the of impact by year’s difference in year’s a second second share at this mark-to-market headwind As quarter. significant and in guided compensation the to quarter which we caused stock due last quarter end the the the February, was in price

COVID headwind of course, share that we And and about February. last a in we within prices of recall second Of last at onset and miscellaneous year. you’ll year’s from severely versus to the in closed other tailwind $X.XX guidance were this that all $XX gave of depressed year, $XX items general quarter you netted currency Tax, that a was the penny repurchase. and small share impact with

slide was P&L. the total, in on again, go $X.XX. adjusted the guided versus So next comments the EPS to Please for $X.XX

basis had points, sales business mainly is impact So real flow-through by activity mix, SG&A slipped Solutions. XX.X%. given increased here profit SG&A operationally to cost We exceeded that when and to XX was benefits. compensation X% of and acquisitions mentioned, expectations a actually and a basis XXX & and strong as the story growth bit, spend down due I the year-over-year impact, our the basis Commercial Gross leverage basis the points it but stock underlying Adjusted on X% at reported reduction it points, including the on currency. comp. stock in the indicative growth you XX was Residential just the excluding exclude of the the magnitude very of was EBIT down was margin

were of It benefits headwind. quarter. and XX% adjusted comp Again, with partially basis impact as cash of point EBIT was reset XX.X%, was through. XXX million some Our corporate Leverage earlier. XX last cost down cost slide. effective again, to did by the within stock and Please Adjusted see margin comp offset points increased mark-to-market the EPS nearly a $X.XX. on stock that to points items. $XXX I million, other on about XX.X% from $XXX pre-tax of flow. headwinds segment basis rate turn we was earnings the the next material the We’ll and in count year. Adjusted earnings tax said increasing the at flows to again the Share offset talk volume as

at favorable flow XX%. was very and million, up earnings sheet record almost balance items. million driven $XXX a XX%, cash Our strong, by again at strong flow cash was up Free operating $XXX

was beginning Orders been negative capital trailing and energy encouraged China due to underpinning Solutions. good we’re to here. X% We improvement good did three-month that in out comps, basis, for strong, growth. from above to slide. volume making inventory we’ve working markets. months. discrete, very continue were down was businesses favorable sales Automation good We’ll strength normalize turn the mapping and distortions COVID-related to impact the several expectations also sales. Underlying continued clinical order trajectory in sales were progress, the go the and and rates on job next on to we’re XX.X% decline the were X% the to trade return we but of negative to and the they upward Please are in at Lastly, through as the managing a as a turn at sequential see

lag sequentially, North Our other world areas. did demand improved in America it but

science, noteworthy and However, very life there pockets growth, food are discrete, of and both signs beverage, power encouraging generation. in

little to Strong continue we in and China, integration sustainable increased adjusted about pumps and and cover now picking increase range. is Margins Cost to XX%, The The at being EBIT and we’ll has stronger demand here and X% see increased but at to cost platform XX cold a demand the of The headwinds, to drive basis we billion. almost but all price We & attributable well. the an to overall, tools basis backlog Importantly, strength somewhat in also base, March strength the discuss encouraged the to realized year-to-date industrial Residential year-to-date. basis the to process OpEx of it All is case up contributing we’ll cost the on $XXX EBIT and up $X.X slide are in XX% roughly increased activity we billion, X% flow with sales adjusted spend to higher projected meet also increasing three-month cash driven very the markets which last offset demand continue the sequentially Solutions. adjusted challenges expect EBITDA, for next chain driven ongoing review in is improved XX%. October. we chain, the expect Please growth. solutions. business. adjusted by EBIT, favorable across businesses the addition Commercial and SGOs are grew strengthen reduction benefits significantly in level. automation we Automation by up Commercial this that at were Europe updated of range we’ll energy-efficient outlook XX.X% $X positive business, when in year. the other now was strong savings. focused did We demand for we’re growth. validating primarily consider XX% the billion The margin will markets, synergies KOBX the go by of businesses guidance. productivity. and for more flow Residential points in we the customer flow trend. see about cash flat increasingly the $XXX XX% underlying above Backlog XXX increasing and Commercial cold most the this next volume go on is would XXX through continued operating continues improving are pace for commercial end is professional Operations driven turn and strength guidance Based the significant and the Margin HVAC when effective regions enterprise. story strong to million normal the very, other of in growth about residential was of XX% we the indicative slide reset to and working for Cash for and billion, sales comp. and platform. & the in This our Orders to customer the $X.X trailing commercial very Solutions talk & million. acquisition underlying The OSI encouraged are what in of are flat were Please made orders to rate across also heat improved entire we on by it over at of X% points with roughly free points and year. Residential $X.X profitability.

capital tax, dividend, repurchase assumptions spending, share remain they Our as were.

$X.XX at we’re We $X.XX are or or $X.XX $X.XX from $X.XX. to plus the minus plus to range and minus EPS guidance by from raising midpoint the tightening adjusted

actively of more business and additional We’re of because increases almost increasing $XX the $XX stock of estimated back working right the plastic increases comp materials about strength in additional diligently very key years. million the headwinds been unprecedented. the of very of and price the good The million we’re that confidence there on and and headwinds. price effectively we see guidance, copper, margin for selected now the are encouraged despite cost containment gives by speed the are the you work headwinds two us face guidance, that what continuing the in working magnitude underlying business steel, unfavorable The and mainly slide, to raw the to they driven in the impact mitigate can to another expense raise in read-through through cost, doing has actions, reset margin costs of versus the actions this, and inputs, by profitability Operations doing of resins price is increased the the February. the cost the in the

and we travel previously than go for about everything orders. of million a goes have on retain as months thought more an the year in side, the more next with the slide activity than comes COVID-related it of that basic the couple Please in expect On like savings back estimated ago. would slowly we update we $XX to plus to

you strength So well provided and month industries as with markets improvement upper in the of we in I Solutions range our that It’s can Solutions you Automation our ongoing America. at North recovered March with to mentioned in February. Commercial three-month increasingly process as in trailing This consistent driven earlier, see improvement as traditional by & in of orders we and is our as XX% the X%. the continued turned underlying global guidance in significant Residential positive see

of for that in markets, commercial, other Residential. of Commercial Residential the tools markets taper will the balance Automation some off but strong Solutions off the somewhat year, accelerate offset & later half we second remain to the tapering expect the partially see in professional end such, demand year, recover we and to in Commercial demand to the general expect expect and We to the HVAC

believe So, of the in year. all we all, second a half good outlook have we for the

orders, next the If underlying you X% growth that pace at range sales improving in go please X%. the and half, X% XX% see outlook. second the growth for what the digits full will the of the to on Based to slide about see in the year for to drive we we high-single of growth

We sales market over detail. outlook talk expect net And and the to Lal just with and $XX he’ll call back a our bit that, billion. about be more above to business end I’ll turn in

Lal Karsanbhai

Thank the chart group. cover here. a with momentum -- I’ll to increased here you, few just Frank. turning Again, charts XX on

recovering First on what’s platform in second Automation first early and recovery mid elements our a through in the there Solutions, within -- we this platform. are essentially is the businesses -- as of we navigated were half broader lagged and cycle we’ve mid-cycle quarter through the the discrete the by occurred

is and into double-digit navigated yielding in go in a the cycle, this well after process QX, the referenced quarters the acceleration very profits from KOB markets digested business. are see on season see in the just and also up interestingly not basis. our which to second significant up Very If the positive, activity, full Costa as agreements stage less and LNG our incredibly the year, second Azul we short Baltic Frank weight but be and significant industrial Pacific quarter. in in the schedules double the turn has Golden important on there’s for KOBX Sempra LNG We’ve which a more business in opportunities that long-term into I flat KOBX is we in So the and very On two the the us and projects, course, the XX% Baja teens Obviously, honestly There’s discrete you we as holding Those Perhaps seeing XX% as X% very LNG awarded the return sales. a year for in turnaround on Peninsula shutdown encouraging. and a I’ll and which activity half mid project underlying as BASF year page world The basis, growth value the Coast in areas. entered up fall we’re here and for was the which guidance very downs horizon. do us the though, the on of half are summer going And encouraging completely the paint both are core across secondly, really site this on walk more to to demand the into give back process -- provides five in that in the year-over-year, in service are feat Mexico, is our XX, automation color some in we of important are space. almost activity soft. before has of awarded strong, encouraging, world the China. almost the booked we Island on down perspective. a the Automation. will activity. continued for we what’s spaces, third were but range to it been fuel in I’ll things quarter X% a the

So some there is activity.

that, it’s we half And half first continue starts to to very bit swing loosen we up entered And of business to that saw KOBX and year of the April. think as to for be that the be on honestly, midpoint. a well-positioned. remainder for the going little tape, as The that XX% from is engage the we’re see We significant till second a a Americas. already in a going XX% I the this to down we’ll

strong year the into life will the strength and I half, half XXXX. we that recovery, of Europe, we think, number year. to that see into that awards the as through that activity to by strength incredibly of driven an continue the first latter be We sciences, second will feel continue the KOBX-type confident I project half of biofuels, there see and around go

has this into of Europe very, semiconductor, all across it’s environment and America, we very discrete whether here. good Asia, expect North to course, in Of strength remain that automotive, medical been the and or

the here overall, is in how second and half America good So, much us Automation. better us feeling about very shaping for about feeling North

inventory a of levels, secular of a pandemic renovation. from pre-build comments team also and & in much cycle, Commercial Residential. Turning obviously, beneficiaries XX, some to we this chart high-family construction the What is benefited year shift suburbs pre-pandemic by then into home and a driven that a residential tremendous was on season cooling the having, which levels, and great inventory

All of that has get led is parts expectation Obviously, that into dampen the of as into incredible year. the strength latter through the fiscal year. residential we first my to

However, in very we balanced later businesses by this this here accelerating business seeing for pieces. where tools, encouraged professional mid-cycle the are cold perspective see XXXX chain that’s throughout in what and and the we’re cycle very

here markets again, good business underlying the picture as to segment some very a for drive discussed. Of it residential which moves world strong course, technology will XX, turning we continue improve page good in And the second will starts businesses. well which evolutions the from changes the to Industrial to as refrigerant a as taper, this Europe, the -- impact Commercial continue I are -- then a the to balanced area overall, with half there’s perspective. of growth And be or residential, pump that heat

half. transport the to the the channel. piece In grow, professional commercial think cold then low we the I which strong aftermarket building driven to see is range the into the chain again, and Americas, in momentum second should and seeing by we markets And mid-teen in particularly, residential are near-term demand tools starting areas and accelerate. the the really world in we as the double-digit go remain all

encouraged activity. So heat Europe, very mentioned that. I pump by

solutions. of a business. and We chain air already tools expect should contributor surge you’ve lastly Asia, by is bolster strong, And that and, headline say cold then as commercial demand growth plumbing to noted in is and in conditioning construction driven some the our course, to of electrical and China

that, Pete, we’ll turn go XX it and So, with page to Q&A. I’ll to

Operator

John Walsh question Instructions] come go Suisse. [Operator with first the Please will from Crédit ahead. And

John Walsh

Hi. Good morning, everyone.

Lal Karsanbhai

Hi, John.

Frank Dellaquila

morning. Good

Ram Krishnan

morning. Good

John Walsh

Hi.

focus will in of perspective in run of in lot of on the driven just the Americas rating see recovery, wanted kind compare and trends of just get easy the to hybrid how you’re be a your there? by process those seeing of Auto probably kind obviously, versus growth against So, is discrete to this markets kind an you Sols much expect

Lal Karsanbhai

seeing, with and we’re we through We underlying the activity with slipped. in John, went but the access, simple the The point, of real as good have. process. type daily limited Well, PO of time, acceleration as short- fuel a site at recall, I limited I That And the foresee increased to FDL you of environment North be in activity will to wane, and is, that the activity. period fix there go we’re beyond we’re Obviously, that don’t to strength, level and in this others rates own year businesses. the above folks, discrete that that booking think, your least driven automation through just customers and on-site and we very and seeing in remain. is our the activity. comparisons of in seeing confident medium-cycle will in quotation have helped in a that rates that country on-site. encouraging having having America, That’s have incredibly activity their rate inoculation now honestly

John Walsh

on updated Thank you obviously, Great. And pressure. view your inflationary then, you. here

the of of to we as you. about the Just QX little price/cost timing there’s year, difference could and and of a versus kind that? price talk any equation the balance you related noticeable about of kind any QX bit think if Thank

Lal Karsanbhai

bit the guide which I’ll We $XX and been the of we fabulous online, copper we’re comments EPS. we’ve there our But, Frank there of classic Ram, on took approach and are wait a seeing in so noted, would we capacity teams comes $XX on in a as the the what a challenging little to of again, John, from team. can headwind more and discussed as million relief doing around market we million. I within particularly believe Again, comment. conservative a is any what there? is resins, overall with the job -- The the steel, as based us. for that see, expect the adjusted we that’s -- construct price/cost. Yeah. there headwinds guide that

Ram Krishnan

Yeah.

resin expect the of worked frankly, impact, as in and I Certainly, an the half and America. half. to as do impact down think in than inventory. impact mentioned, we bulk steel, QX our we see online. of first do expect on steel come But the the and see in of and But Lal pricing back we’ll We what North see second capacity we QX. copper particularly we in didn’t in China is the steel better much in

hopefully, soften get part pricing little start that year, -- So, of later that as we seeing bit. steel we’ll into the a the

that’s of built plan. what’s kind the into So

John Walsh

Great. it I’ll along. Thank pass you.

Lal Karsanbhai

Thanks, John.

Operator

DeBlase from ahead. Please question with come Deutsche next will Bank. The go Nicole

Nicole DeBlase

Thanks. Yeah. Good guys. morning,

Lal Karsanbhai

Nicole. Hi,

Frank Dellaquila

Good morning.

Ram Krishnan

Hi, Nicole.

Nicole DeBlase

there. Hi,

maybe quarter. could we hot going about really a this what’s supply little And on talk so to bit obviously, with a issue respect chain,

that upside you’re extent to in to what be, guys the about could and revenues what seeing talk a So I half? to if could you guess, cap second

Lal Karsanbhai

Yeah.

lot certainly, availability press chain, So, challenge. of supply shortage obviously, terms inflation, of on also and but in a

chip whether heard example, standpoint, its The of side, this our plastic, inflation that. Certainly, alternatives. supply the a in managing Frankly, able of through managed point, from we’re through pretty teams, to resin, an well. probably on electronics our we’ve have job front, terms electronics to For where supply from the move been done Asia I we’ve remarkable challenges at would global you’ve electronics say, on shortages. steel, availability availability

locking similarly capacity that to a supply addressing. needed ocean freight or seen and is something we have our think price But frankly, in preferred front, overseas the teams from point job productivity whether And airfreight, haven’t really to we’re this I on challenges. bring through any at availability rates. our the ground, its material done and programs, good in logistics chains,

We market where to haven’t we’re spot lot a of out which go yet, seeing that inflation. into the had is

we have to we far, well. is supply we’re would say, overseas strategy, significantly our really business our out other I would point regionalization managing regional had our so the want benefit supply to through chains feed a where where on chains piece has I to So rely been And pretty significant haven’t supporting plants.

Nicole DeBlase

then, want the Got That’s I anything thinking it. guess, helpful. about quarter, really to guys of fourth the versus the quarter EPS highlight revenue margins Thanks. And there. third you in cadence

I kind what of sense earnings look give us think quarter’s a usually will you like. next of the

on just to versus XQ So anything provide XQ. want you

Frank Dellaquila

Nicole. This Frank. Well, is Hi.

I at just on very, strong have that backlog third available in see very looking a the based that think to quarter we’re coming orders us. the we us we and

a less would at will as I So be will point, the say, strong, I at quarter half, fourth very into good be third quarter look fourth. second this but little visibility the

So that’s kind the now, of right how we it’s towards frontloaded tad maybe a see it quarter. third

Operator

Coe will The Wolfe come Research. next question with from Nigel

Nigel Coe

Thanks. Good morning.

Lal Karsanbhai

Hi, Nigel.

Nigel Coe

call the feel hear to Good Hi. different me Very today. voice. to hear Frank’s Can you okay?

Frank Dellaquila

Thank you. Thank you, Nigel.

Nigel Coe

So, Good. Com Res.

growth during inventory your some you bit OEM But the growth, rates some levels we’ve very orders. some QX, half channels that? strong a on back little lighter year. the in come of looks $X.XX and a acceleration there’s like the out deceleration and happening nothing on customers just whether destocking curious It got just of how in into nice Res, phase saw Q-to-Q. Com But coming the curious So to from look than

Frank Dellaquila

Good hear Yeah. And voice to -- thanks, well. Nigel. your as

think I in the which well, and Com into growth a has impact there’s an tools between beyond the as broad dynamic business, across commercial of residential Res terms rates. in climate here there

seeing residential We’re strong have of with customers OEM growth. many reported our

NAC. chain in a our we between have balance have although, and cold that, business Now, we

difference. where see So I that probably you think that’s

Nigel Coe

a the virtually how mean, mean, judge versus how do that in-person Great. that And Lal. I and just But the the question think customers a of you does play this of engagement year, you do here, out random bit going I instant virtual Exchange how evolves… of sort forward? of

Lal Karsanbhai

Yeah.

Nigel Coe

forward? going …

Lal Karsanbhai

a we in us Exchange. And a the year. season to is as Automation, the a learned Great think and Exchange Europe obviously, get lot, and didn’t got you’ve this we balance. Yeah. know, engagement you through event we what Americas customer for It’s No. as choice question, learned we But attended an and, very I a the Nigel. special in We be there’s know went throughout. have that great I

to I the want get to ground think now through much that to to works be or the engage They able or we to customers base way who singular virtual broader keynote. day be to may in for we platform, of that with have not engagement in with in a and opportunity don’t the can away may do folks form presentation of also a travel, But a or going there’s in the night opportunity so. subject customers be that a listen see if on who them. we a reach interested devote and a have from dial

So going to it’s I think a balance. be

of still some where think when to the value as because were saw engagement in you us comes is be lot is you as in there you with really those important, from of going I Nashville, know, discussions. there a engagement customer that

that. base not of to a want the can in losing -- we original while intent So It’s we, the don’t lose I new I meetings. broader think folks construct, reach of think, this

land. spring fall. Exchange. I talking hope The can fall guys So the versus it see are I’m hold we now. We’ll excited where right we about in about the

Nigel Coe

Lal. of Thanks, Best luck.

Lal Karsanbhai

Thanks, Nigel.

Operator

from Mitchell Julian question Please come The Barclays. with ahead. go will next

Julian Mitchell

Good Hi. morning.

Lal Karsanbhai

morning Good

Julian Mitchell

bit on question I think wanted we guide -- margin seems the and first double segment number morning. as in incremental maybe level year to EBIT that little It you because of raised imply and a check Maybe so Maybe specifically. sort for just a outlook, a about than whole. all good a mid-XX%s half second that margin of the as XX.X% the to corporate to aspect of the the lower on. maybe on sort the

the divisions, and any Res. Com roughly two to margins second that’s difference confirm in in math the half AS wanted the for versus if right incremental Just

Frank Dellaquila

that’s I -- Yeah. in mean, I talking the incrementals you’re about think, the the leverage.

I to think the Hi. the Solutions. Automation that’s It’s would mean in This in I is I the incrementals be Julian. in ballpark. higher ballpark, Frank. expect

But of good on a have certain have least it’ll the Residential incrementals. will for that profits not the we’re & doubt to We be business and in will sales. leverage deliver digest Nonetheless, Commercial headwinds price those and couple next cost we quarters. at hold to headwind going the for in the down incremental those on incremental will

to think Com Solutions than Res. I see Automation So to higher be in expect you’d in

Julian Mitchell

much, then end backdrop around there. sort Solutions, outlook of the very broader maybe question And a Thanks market Automation in Frank. topline

from of that KOBX about big here? So that mid-single are sort backlog digits do we How projects up. the backlog do maybe Understood think the think pickup year-on-year. about was the of AS up think How maybe we stuff but backlog sparse, Sol picks flattish that I pace we sequentially Auto from the here? saw relatively trending that

Frank Dellaquila

Julian. Yeah. Good question,

the through activity, in backlog is and and businesses, of So discrete systems I shifting final the number. systems measurements going and believe and KOBX that particularly significant, through forward XX% quarters we Automation first Obviously, year-over-year we a suggest becomes have solutions in terms revenue the is fuel went in control of I’d two up the business. our more growth mid-cycle

And within I and growth within So quarter but consequently, significant ship a that’s that in parameters backlog quarter expect half. today. book a more to wouldn’t necessarily what the within we’re the in or call we

XX% I in backlog So growth. to XX% that suggest

KOBX that the I expect we’re grow beyond today. vast don’t to in the without So activity, rate

Julian Mitchell

you. Thank great. That’s

Operator

next go The question come Davis ahead. Scott with Please Research. Melius will from

Scott Davis

guys. morning, Good Hi.

Lal Karsanbhai

morning. Good

Frank Dellaquila

Good morning.

Scott Davis

morning. in encouraging of here? early is I your month. working a April. good Comments a team. you’re It tenure different I compensation darn -- a Encouraging relatively complex kind completely bit kind been new. your comments of pretty Lal, of made must’ve you’re management for on things questions since, on your you mean the Is that adjusting -- had structure But little good one couple

Lal Karsanbhai

Yeah.

So, make you Residential around. be perspective Commercial and on to the continues have have trend Automation to comment April, I thanks. from April experienced expectations did and what perspective we and an to from yeah, hear good

So by I’m encouraged that.

Flavin we In an there And she I’ve here of our work terms we’re Lisa actually and closely the There’s others. of through structure across And very an summer -- there for undertaking energy we have what that we and a we have organization. executive yeah, us. take we of the we’re a in with how time. is go culture the enterprise. is the well. compensate -- comp our structure, about looking by the as in on around place openly looking something evolution spoken a I at on and we led as force and Compensation today the absolutely that task lot journey we’re We’ll lot as there’s to hope will and fall, we’ll through opportunity be Board and that think the

Scott Davis

Okay. Good.

differentiation? of an product why guys now. your you heat had have in Is heat talking of technological talk the I been think you a mean, pump can kind quarters market win pump guys you’ll perhaps, As the unrelated in about maybe you market? follow up, through couple Europe for

Lal Karsanbhai

there we’re for and the of we’ve pumps forward. a what opportunity in customer technology the has I very think really But what with out the I And the strong think think sound is marketplace I where growth that’s European the differentiated in obviously, been big I a well-positioned, -- think heat around attenuation offers long base fuels efficiency. versus time. part we the and going stand had a

product about So grow the we and going where forward. can we’re been have excited where investments

Scott Davis

Sounds good. Thank Good luck, guys. you.

Lal Karsanbhai

Thank you.

Operator

next Tusa Steve JPMorgan. ahead. will from come The go with Please question

Steve Tusa

guys. Hey, morning. Good

Frank Dellaquila

Hey, Steve.

Lal Karsanbhai

Good morning.

Ram Krishnan

morning, Steve. Good

Steve Tusa

be to used for the Emerson this. have an on in morning, all wait to Strange day call to

for The comparison your at thanks looking that. XXXX. versus So just --

down in relative half So to XXXX. first the sales are your

comfortably, Your EPS on EPS know in the don’t revenue is maybe $X.XX seems it a show half? half over of don’t price with there. plus. the XXXX, maybe or I in back in range. really like parts add us moving that. of down what the is kind your half take back high up to kind already What’s you’re XXXX The versus should the first headwind of and to XXXX comps similar of end pretty of If guidance moderately did very be still. at just just of you like, the sales year-over-year big benefit but it growing the could like nickel versus But help know you second you’re something cost XXXX improvement like the half already. I the very like just strongly without it, I any material whatsoever XXXX,

Frank Dellaquila

Yeah.

this We your million, I two point, were the the of I over we make the we’re second out. half raise we’re here is prudent in got in through Frank. obvious get $X.XX. cost some headwinds our half the the then the waiting and take comp, into are we the uncertainty this way as thing work But guidance we’ll see of XXXX understand at big how we half a the work point. is do those in to So, to plays the and so to we between XXXX, Steve, going stock that increase both through that comparisons it’s through price the mean, not quarter. the second $XX you think this when XXXX. go point But visibility make to get of million have headwind second some and there confident you’ve we’re $XX not At that better to as fourth this.

Steve Tusa

HVAC just kind see roughly? like putting What your did of then to core types And guys you year. big resi of you the of on a in this of very different up strong perspective. customer all end compressor a results last quarter kind calendar side, players different know from I year business U.S. have kind

Lal Karsanbhai

So, this Lal. is Yeah. Steve,

business a the we in quarter So, States. the we in strong very strong had climate United -- had a

me, a And see excuse in We really pointed QX see perspective in into top where HVAC U.S., accelerate. us. with digits, orders in as digits, for this occurring, mid-single you’ll continue really for grew acceleration the out, that’s sales conversion Backlog grew from the mid-single Frank U.S. the purely to us.

Steve Tusa

kind that given business remains quick Right. together CR&S? CR&S. you a guys for a a Historically, is is play. and everybody smashed of as driver one, big growing kind big mean, percentage now of businesses mean, as that of And compressor one thought of just I China resi now U.S. a I of you is how these how Europe you and big percentage fast. business core then U.S. as

Lal Karsanbhai

sizable It’s Yeah. a business.

disclosed size it’s entire entire haven’t to CR&S sizable assume a the But platform. We climate of it the and platform. the can portion relative you of

Steve Tusa

a Okay. lot. Great. it. Appreciate Thanks

Lal Karsanbhai

Steve. Thanks,

Operator

Andrew go question next The Bank of Obin with America. will ahead. from come Please

Andrew Obin

morning. Good Yes.

Lal Karsanbhai

morning, Good Andrew.

Frank Dellaquila

Andrew. morning, Good

Andrew Obin

sort the to and that mind? them? upside there is reason Just picture how industry, energy customers to as given potential price them sort activity, massively any a set wait of we sort next until their big anything oil question, given are that you -- change budgets or of can much talk be there see do need your year change the the to to economic there how into Is of think could increasing high year in

Lal Karsanbhai

Good question, Andrew.

the good skews on assumptions the gives demand and set baseline towards we business I price. significant if said confidence that, in elements toward efforts, Having oil Having think in planes market. a efficiency and in are in they’re of recovery said that around do see sustainability skewed that, we of are the us and budgets been the think to see operating advantageous air, more beyond more trucks set the on have calendar there the economic and I go expansions the be year the above calendar half will where in through the Automation that broader half prove road, into today. of we second second business, of to activity, budget the as the we’ll area year,

Andrew Obin

think heat question Commercial we Europe. the business as about Residential, Great. pump on another And then & in

much it. over how talking business in have certainly lot regulatory But months as that? term how XX this much about seems to a to sort visibility been is of think accretive the it we part about the neutral How of have XX months? a longer Thank guys it -- You trends. visibility mix, to should mix, next the And you. do

Lal Karsanbhai

Yeah. Go Ram. ahead,

Ram Krishnan

traditional say of good with has play would space, the the in very which China. opportunities the visibility ours. customers good. I OEMs, we in heat have well engagement in Europe, But Yeah. as been have in Europe, These as pump been very our

technology engagement OEMs. terms the our new complete the to line our Lal in that relates solutions in it of we’re as with scroll product referenced deep position that sound, and and market, efficiency So for

was your question what say is would that margin I good. then is accretive, So was? And -- the visibility question your

Andrew Obin

very or for it Yeah. is margin? for good It’s the it margin simple. bad Is

Ram Krishnan

It’s -- to it’s the accretive to I say slightly neutral would margins.

Andrew Obin

much. so you Thank Fantastic.

Lal Karsanbhai

you. Thank

Operator

question will Tommy ahead. Moll from next The with Please come go Stephens.

Tommy Moll

morning thanks my for Good and taking question.

Lal Karsanbhai

Tommy. Hi,

Frank Dellaquila

Hey, Tommy.

Ram Krishnan

Tommy. Hi,

Tommy Moll

quarter good factor were is back step least think expected. as bit go? maybe progression, would execution have the the in at pathway XX little Comparing have call. to that you through flow-through the the release and as to in versus a Well, last may even ago, thinking the than for clearly, for about the things so cost us margins quarter where against as, timing the wanted what that worked most talk if you if you important changed. and shifted? the I we and maybe record a referenced I’m some a pathway of temporary record that the margin of on But highlight factors days, just price/cost, better on But you about the to endpoint

Lal Karsanbhai

really Tommy. words say actually I’ll I’ll a on of Board the couple to presented this yesterday. good subject and feel who Frank, about I let, Yeah. the path,

endpoint they’re our potential on We what acceleration cost. path in the the in and predominately But tremendous in have on The is a on peak that referenced our track is I’ll challenges are margins price/cost Commercial -- to predominantly performance work. Solutions deliver the Automation & that that business. with say Residential you

Slightly second very I So one very, platform. track feel ahead on in positive. on the Frank? platform,

Frank Dellaquila

track the targets which for and in good schedule, we The in -- hit mitigation pickup been right reset to as well. this very four are headwind XXXX. taken that timing that back in derisked us throughout improvement we this taken we’ll year out achievement are the mean, and the of a volume significant the did in temporary of basically yesterday about laid And have next Solutions there, ahead that believe Commercial and put Yeah. the flow-through strongly regarding of February actions Automation Tommy, in trench those we targets in pace to have we’re well. feel be we the going of business cost the three, Residential, couple, even have margin that margin really actions that in plan. on being offset price/cost we to conversation I quarters the & summarized very we that it Lal

Lal said, very face we get we hit line XXXX it. good feel we’re going So, as leverage finish even the that unexpected the to the that of in in on the have price/cost we to based as

Tommy Moll

that’s Cultural is And you, a Thank if that you question Lal, few is a tied one culture. made execution. now are I to helpful. very and to both. up months on you’ve in. value important with also clearly modernization clear But you? That’s could creation follow theme a

Lal Karsanbhai

Yeah.

Tommy Moll

you can division, for about of there think it? the you’re us an provide now So a to you’ve had update bit through how going time little what approach to

Lal Karsanbhai

Yeah.

So I Tommy. question, the appreciate

-- we want thing things of to doing where is one measure The the we’re today we first first go. need sit and we to where

understand tool firm a outside the to do the and that So assessment Emerson. with understand comfortable like salaried employees we’re an pilot working done tool how We’ve employees, we to tool. the a cultural works. of of XX,XXX feel the We

going that, important would of month that’s of company are broaden this wants where I we of addition culture. of to taken data, the to go is low a some Tommy, work were the suggest here in May. So hanging set where understanding and out of to us modernization of fruit, very in And some what terms practices. the we’ve the going population care the to in that, give of

after a and Company & conversations McKinsey diversity target ESU with as in working the report our Board of which publish part and with goals, We’re we’ll inclusion on June.

on. lot going activity a there’s So of

we’ll a inside more if value. all we’ll where of live We’re that at believe we the work do be about we of better higher perform the we a create rate world a at energized We’ll and very look opportunity day more honestly, Tommy, the and company. end and like the Emerson,

Tommy Moll

Lal. you, it back. turn I’ll Thank

Lal Karsanbhai

Thanks, Tommy.

Frank Dellaquila

Tommy. Thanks,

Operator

Mittermaier next question come ahead. Please The with will UBS. from go Markus

Markus Mittermaier

morning, Good everyone. Hi.

Lal Karsanbhai

morning. Good

Frank Dellaquila

morning. Good

Markus Mittermaier

of a in Good finer ground hey. question Com But morning. lot cost price maybe I could. if Res, a already. covered maybe -- on But We’ve

way the you were inventory. from basically using understood QX So protected is essentially QX, you that

done you should view So price the future inflation of how that there. far is start might your guide or to best Maybe can cost so what to-date? unfavorable inclusive price you’ve and Is that given? I that $XX read planning on million you on based trends be

Lal Karsanbhai

we all guidance. predominantly degrees cost and the have with with all but & but mean that I complicated mean, I the incremental they’re pass-through Markus, we’ve into in they lag. clauses, to So, subject, $XX OEMs, Residential, of major Commercial guided obviously, different varying price factored in that is a And it’s operate material

and back So as take well will platform, comes pricing confident in, back rest while the guide inside actions actions offset we’re of mitigation time. comes price that it we over of Across the to that provided. the the deliberate in we’ve

pronounced a we we’ve and here. how historically. think out. how more in is memory will increase anybody’s than that’s seen out played This how it it that’s So That’s it’s about play just

Markus Mittermaier

that here. China, on then various there Maybe comps obviously, short- both to China, take see in Okay. the is maybe How Got And for and given momentum question specifically easy you broader verdicts quite Thank on long-cycle you on tour you. through on you the us past quarter ground? the a stay in the sizable could do guys. it. a

Lal Karsanbhai

Thanks. strong Markus. feel very we’re seeing Obviously, Yeah. in Thanks, I China. platforms. across what’s about the past good was very, all quarter

We’re commercial again, the the And and chain second project-drive, seeing transport, construction-driven then cold there the encouraging Chemicals obviously easier good activity Infrastructure, comps should well. on climate trends side, KOBX-driven, come particularly. the Automation as but side, around continue also segment, in of year. but half on through particularly which the the

fiscal. year. throughout remainder are So feel for Teams and the very I engaged about feel what the good about I the of see positive really China we’ll

Operator

RBC from ahead. go with will Please question next The come Capital. Dray Deane

Unidentified Analyst

in I prices your $XX a on guidance Hi. WTI question think Good [ph] for Jeffrey prior barrel. morning. This in a to is of Deane. My barrel $XX based is

that now. pretty is how that from changed maybe and the above into what are guidance So factored think that new customers? How I comfortably your hearing Maybe has thinking? level sitting we’re you

Frank Dellaquila

Yeah. activity the in and baked it’s our of Jeffrey. Solutions increase Automation there. Thanks, levels embedded the guidance Obviously, we’ve that in Yeah. thinking and into

reflected But of in and in that forecast talked about can past as segment, We’re you now. the as seeing skittish the that $XX questions in in the customers are spend the closer budgets more being one activity they to rate relatively imagine, and here. we the number still past

clearly, So the will the land feel for it But little bit increased they’re closely. year. in where watching ultimately reflected the a I stronger WTI as about guidance,

Unidentified Analyst

just transition? talk of from you a role? conscious timing potential can CFO role to separate transition? Chairman about a the Was any one, the maybe then And decision the on Thanks. it. the Got And another it you maybe CEO Chairman have update

Lal Karsanbhai

he’s and... Jeffrey, right here the happy is very me that with Well, with CFO here I’m sitting me.

Frank Dellaquila

that? to ask Dean Did tell you

Lal Karsanbhai

No I’m his and and be important very which this Frank Frank CFO have transition here. team. very I the in honestly have incredibly happy for very will to foreseeable that blessed experience, future management

So nothing there report. to

me it it of the -- was was learn piece not to time, to honestly, to the Board. and highly the to company, Obviously, separation Chairman, discussed the think have terms In very operate right the I think early the over researched, of as debated the of role important. felt so place. comfortable supported very decision. enable mentorship good governance Board from the with my stages the you Board glad about I’m that a landed and of it CEO-ship, again, we really with Directors, in And was

Unidentified Analyst

Very helpful. lot. Thanks a

Lal Karsanbhai

stop... you Frank, your are in retirement,

Operator

go ahead. Kaplowitz Andy Please Citigroup. from with come will question next The

Andy Kaplowitz

Good I’m very happy around, still morning, guys. you’re Frank, so.

Frank Dellaquila

Thank I that. you, appreciate Andy.

Andy Kaplowitz

All right.

growth stage. how quarter revenue growth color you’ve to [CR&S] last you about you guidance growth residential revenue how C&RS QX QX second I the difficult that tools look, for comps FY professional XXXX So you X%? QX term C&RS this against refined in Obviously, more gave comparisons the give were half you how think, the Analyst guide the still in given into recovery wondering would about how at at But might and translate your were your into sound (sic) and longer the out. visibility shake more (sic) for could thinking us that you [CR&S], good tougher your growth Day and would in of X% on

Lal Karsanbhai

cycles, in I but all of the growth. chain, we’ll But QX, of the the the right? is whether good go not cross QX quarters. a the and on is I now with off, that I’ll but that on early The side, in section that or into platform incredibly comment residential, good it we’ll in climate just taper consumer and yourself balance which think, side into taper it tools tool QX, which as benefited balance cycle the it’s off for because hot star agree terms also QX accelerating, will will off have is it. professional been businesses, tapers cold feel of in the to number do from big has, which going news

point, year into strong. into half a It XXXX. So this perspective balance is this into of honestly gives me, confidence at least the incredibly heading and at latter the balanced

Andy Kaplowitz

update us had That’s helpful. don’t your guys the ask for in that you every $X.X to sense, mentioned And you sure you I’m funnel billion about in you $X.X had electrification But me quarter. the in want mentioned so funnel. let funnel

maybe about or obviously, talk us new bit. a actually of an terms enter bit? it little also of But the So the to good to update is you these on projects KOBX little maybe perking funnel, move time starting it’s some projects to old a Are OSI. a up in funnel really seeing

Lal Karsanbhai

things both. bit Island starting are Obviously, for have and X-feet stages a been Golden about to debated time and the little so forward. long and are move Baltic those discussed A of talked and on

whether a know job part eighth we significant going to forward it was wave. that’s So as relatively something that is, of, its like terms But move in didn’t that new, obviously temporary LNG elements. of

the is job. ninth this Now

So very that. see important to

about In billion. The $X.X, said but electrification fall $X.X hydrogen-related piece, terms Biofuels element, that, of are still the of facilities $X.X. smaller. as addition that modernizations relatively that stuff funnel. would you there, in into billion be new about There’s the newer conversions The to in $X it’s funnel, in it’s some existing range. in what’s

encouraging relatively things to left. you the as it is to it’s moving static, point So some out although see

about of first the put that phenomenal in sandbox. and more and I I management expand business OSI, present with Board. and -- of opportunity terms they’re in we plan about really feel what us to good to the to six the accomplishing. the team it together invest feel internally And Now, continue and months ahead interestingly, to great our

for in both, and we I a to both diversification. think do unique end if organically do want very us technology available of more, it’s We both and but opportunity market terms inorganically. want to

Andy Kaplowitz

Appreciate it, guys.

Lal Karsanbhai

Thanks.

Operator

from ahead. come go will Cowen. Gautam question Please Khanna next The with

Lal Karsanbhai

are doing? Hey, you Gautam. How

Gautam Khanna

you Thank very Hey. much.

Lal Karsanbhai

only the not name… one gets you’re who Gautam, your

Gautam Khanna

you. Thank

Lal Karsanbhai

not You’re massacred. only gets one you. name there your with I’m who the

Gautam Khanna

being remember we No. called Little Not Yeah. when was in League baseball. I know understand still all. I at I other. each Quantum

Lal Karsanbhai

Gosh.

Gautam Khanna

So, hey, a couple questions.

and in KOBX the you mix First, quarter, of the versus what was are at the respect other two? Sol guys second in what KOBX Auto expecting half the to with

Lal Karsanbhai

honestly, XX% through through expect on that us. strong relatively the that half. we within I first consistent XX% It’s Gautam, the range mix So, see first, second I And to KOBX. XX% second to very very we But stay for half half kind at as it, of second obviously quarter of stayed as the a where go that’s go year.

Gautam Khanna

that’s pretty visibility Okay. being Anything there being seeing behavior Any respect than different that’s with a cyclical strong. you’re of And turnaround in sort buying in talked normally about to you would see strong, you your opening remarks customer in turnaround noteworthy? recovery? backlog scope of change

Lal Karsanbhai

Yeah. No. Interestingly enough.

the And went the is most systems and as turnaround virtually of because upgrades the they we COVID, through saw remotely. for the that to the we lot what continued. upgrade work a that part particularly So continued was perform in environment ability of reason

hangs now And honestly, seeing valves, remotely. tremendous capabilities Delta impacted mostly on our that We in that. equipment the to the and do which performed V activity business just the that transmitters, stuff upgrades around to acceleration. that the Ovation to that, business was two on as do no do world. in is And have What or continued flow system was ways we’re pipes the there were our vessels, the

cycle whether question. one, this and two your that we’re You’ve the with Gautam, watch have What may lot there two entire are frequency the things, be scale not based we’ll experience. a on not, familiar on on-site months, rate seeing are versus got necessarily the a a are And almost and or whether turnaround. of site may the months, your question, people facilities turnaround, these they XX the you’ve people the without turnaround performed, at got of Number can units or of to this trend XX there. have at is turnarounds which They turnarounds over have doing the to now or facility. cycle many and secondly, the they expand one gone

this carefully over into the we’re watching the but got yet, it message know that there. gotten necessarily very don’t I Hey, we and Ram, as haven’t cycle, We fall. you’ve this particularly if go through summer season comments

Ram Krishnan

No.

Lal Karsanbhai

Okay.

Gautam Khanna

helpful. Thank you. Very

Lal Karsanbhai

Yeah. Sure.

Okay. organization of of hard really work have I momentum lot about XXXX. good for the that and lot Well, I and want today. the to into of energy. teams, as was the year the my a a feel as first engagement thank phenomenal second everyone we I for CEO. your felt questions and thank I a It quarter your -- an half about And

So thank time you, everyone, talk for and soon. your

Frank Dellaquila

Thank you.

Operator

is for presentation. now you Thank conference attending The today’s concluded.

now may disconnect. You

Emerson Electric (EMR) 5 May 212021 Q2 Earnings call transcript