EMR - Earnings call transcript Q3 2021

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Operator

Good morning, and welcome to the Emerson Third Quarter 2021 Earnings Conference Call. All participants will be in 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. I would now like to turn the conference over to Pete Lilly, Investor Relations. ahead. go Please

Pete Lilly

Executive the for Colleen will much. Automation Krishnan. for your to been health so certainly past Emerson wish the going support and Mettler. upgrade everyone, thank Many and Chief new role, new finance main Solutions and and call. Officer, the Chief years. Thank Dellaquila; welcome, to fun. of units. I also Frank I couple us Good certainly business a as Relations, like thanks for Investor an again and contact your the Chief and President by joining Colleen I’m Officer, role earnings you of Lal from Emerson’s you friendship and us joins Karsanbhai; operating Today, and you Financial Ram for It’s in you of organization, Operating over joined success. morning, Officer, try I’d third be and leader to forward, conference the introduce transition quarter point all to

follow I join with two. everyone slide me to website. which along on always, As presentation, on the accompanying Please is available encourage slide our

presentation of I Please may some developments statements, As always, introduce and call to and herself turn a turn within degree cover over exciting forward-looking this the contain business to which will slide include Emerson. And uncertainty. risk three. to Colleen

Colleen Mettler

fill. Pete. Thanks, big have to shoes I certainly

I investors the all to into partners team this and years. been forward this excited I’m Investor with from I’m coming I’ve XX joining and with speaking our our time finance for during to Pete As very over and be Relations humbled soon. organization. dynamic Automation for look mentioned, role our Solutions Emerson organization, certainly

real I impact Emerson. would within ESG of highlight a areas like to Now, moment two take to

It multi-year with is X, about by, solutions February, PureCycle First, process a on polypropylene Emerson. sustainability which in number greening a framework of customers’ has example a how with agreement enabling signed Greening topic and our a recently are first is Technologies, relevant keeping technology recycling our we back and X, with to for and fully pellet. in clear sustainability plastic that by Emerson Emerson of, initiatives. Emerson novel environmental of slide great introduced

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Now, please join me on X. slide number

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Now, CEO, Lal our X, the please I will slide turn turn call over Karsanbhai. to and to

Lal Karsanbhai

Thanks, Colleen.

data. I the before to through turn over to go it words few a Frank financial Just

Pete, opportunity. First, thank much, your luck you a new very in and have Godspeed good

Automation of and Solutions, we’re Colleen. Colleen the blessed to a It’s excited hard have together couple and in of very very here. I’ve work. to And Relations great you Welcome, have thanks her team. for spend our had to years opportunity the join all We’re Investor you. all for

Colleen Mettler

you. Thank

Lal Karsanbhai

management as we leadership you the a to But, I meet I see and I behind has momentum exciting also you, confidence, and of to had to last to to course challenges, and that I my of globally your very, go and well-executed few months. energy A I’d three of have appreciate And the of forward lot express more your the you, team thanks look executed next as six which my shareholders. like things, thank of the teams a to Thank quarter. been related through the our very I for we many So, welcome. year. that you. meeting last are and wanted employees here. months I’d your our like through just to very to over -- continued part mention us, investments. non-financially to opportunity the the express was the what

of our underway. is work well First cultural all,

People We will new announcing our month. Chief be Officer this later

Emerson very will pathways have excited create into and as navigate fundamentally really selection in come It be who of will help all about hire the the the that process. us, somebody we the future. culture and and outside of the of a We’re to we some the have here evolve challenges as many opportunity an we

complete. work portfolio our Secondly, is

yesterday. we’re Board, to getting our it now which higher with and for we -- briefly Board We diversification We will Board the portfolio. what essentially, with business to drive defined ready the have October growth paths the And multiple at the occur are discussed review of underlying Meeting. sales is

underwent. pathways we continues be share I’ll and a exciting high we we We’re M&A that about And as defining in software broad terms over potential growth optionality to all acceleration. think of of on and mention and for critical, wallet are about underlying have very of growth there. loss about the the very of was industrial think excited spells, front many we there. lot there the M&A organic very It turned And different activity, with markets process exhaustive.

incredibly is plans. board of acquisition Our internal ahead synergy and performing well our OSI

relevance of leverage -- overcome they work qualifying were XX% stands And at value increased go incrementals management seeing, to of are us and share businesses. was investment We market The quarter, Company. in it underway. further, and of the about now, the the So, strong, customer execution in very well headwinds, material number we’ll and And had over very, particularly in relevance in differentiating of of our the tailwinds, the most is technologies. above availability. were the reset just done. There And as year. of the very what we’re very being accelerated given United And we’re relevant, And further well as those about continued at talk before very through those a I But, to cost -- importantly, end team commercial despite that a room course, so all We we’ll base, investments. to those, out been exciting and team. has that’s span. cargo And will inflation, me Automation started by labor our they material Yes, around that’s reflected tail the turn to with a these the talk I’ll the think, logistics was accelerate the but Frank, phenomenal. you. drive operational there created. execution headroom across lot absolutely work we residential now I that the the that through most hurdles lastly, we profit And operating leverage is -- in more And world, availability of a did suppliers, and, the lot did But, creative great the States. expediting. to job. get of in Solutions

that, I’ll I’ll towards with turn Frank. the call. end the speak of And to So, over it

Frank Dellaquila

Great. Good us. joining And morning, thank Thank you you, everybody. Lal. for

later about the We’re Ram them with just Lal in in will operations talk and especially of pleased the results light the call. in described, quarter, especially that challenges the

you please to six. If go slide

up growth be ahead of very leverage, notably & were of demand to robust benefits in margins. XX% up to sales underlying XX%, flow recovery realized our from XXX and adjusted continues Commercial planned, prior sales and cash strong volume basis. with actions additional in and and and points of with The they year. basis in the sales an orders cash $X.XX, strong in reading strengthen Residential XX% segment cost business EBIT XXX% flow continued free and to of quarter. in So, our continues turned quarter along with basis. And the continues year-over-year with orders, this free EPS markets three-month to the XX.X%. Demand through conversion the Cash Solutions and the geographies Adjusted drove Automation trailing orders growth XX% to performance and operating an financial at be both the experience underlying with cost as across net earnings. continued benefits exceeding XX% the was on June growth to on of positive Solutions growth X% XX% sales and increased underlying margin approximately XX%. combined expectations and reset operating flow end third the coming results XX% reset of

The was program. of and In There’s to year. the share Please remaining prior is initiated increase million strong. implement operational the savings, restructuring X. a continuing this we reset quarter, from very projected earnings slide actions. on turn of delivering program $XX bridge planned. as the per we We’re the to schedule elements cost of The performance

share So, there chart next stock both balanced benefits, $X.XX platforms. and XX% it Tax, volume the in Again, the Ram purchase. and strength to the reduction number EPS, the comp as and total, XX%. between minor this EPS a the XX% a from was pension was chart across adjusted while bar. is noteworthy delivered was was mentioned, of the currency, profit They thing $X.XX, strong chart, enterprise. to impact on go a leverage increases green Please on leverage netted up added X. favorable cost Operations to adjusted headwind,

the of We and cost intensify XXX credits items, R&D we on then at is headwind the actions Effective This the a year. prior talk the will around basis EBIT $X.XX, EPS, we we up will Adjusted we was had that $X.XX headwinds, about So, couple versus $X.XX last across to XX% increased Gross which time. several XX.X%, overcame. we points tax year, by points. described call. that the benefits basis price as mostly beginning volume as leverage impact the the and sales see XX.X% driven was of versus was favorable enterprise. profit a later year-over-year I reduction in Adjusted to the the next are margin cost was we and discrete in Last mentioned, rate see of did underlying XX.X%, in little year. XX%. which XX up offset mainly quarters, the mentioned,

earnings we’ll again XXX X, Technologies If EBIT in and Adjusted you business. go cost strong XX.X%. benefits was material billion. Free talk Leverage a cash on to cash and also volume $X.X reset working flow. up at offset basis over Operating XXX XX%, driven flow Adjusted and Climate increased earnings by flow up about up points please, cash XX% million, the pretax segment growth increased to margin points. XX%, strong, very earnings was $XXX slide cost effective management. headwinds capital basis little

Lastly, XX.X% the to of ratio trade capital working sales. improved

positive encouraging XX, quarter Automation and momentum continued automation Trailing accelerated business. is The we’ll across and a Underlying in Turning to the this Solutions. look markets to to slide sales markets beverage more broadly food with growth three-month improvement at sustainability-related at process orders and life in Americas medical and the turned XX%. notable X%. particularly and return sciences, traditional

benefits projects. seeing to process by recovering emissions demand basis basis points of base, returning across to OSI a at spend. actions leverage. outage implement tailwinds Adjusted the delayed flow-through flowing EBIT at comprehensive well. go the from have is by spending CapEx points platform financial The margin automation optimization the adjusted of levels the driven We’re by KOBX integration slower the site-based the and cost increasing turnaround continues ongoing, OpEx are rate that from EBITDA, activity results. pent-up to shutdown our and XXX with to is and and very reset been and MRO continues pre-pandemic activity STLs. and savings spend increased The restructuring mainly XXX mainly and driven through customer volume

XX% year-to-date. and opportunities We’re with that to increasing Backlog funnel It to other we very bit billion. plan date, in increased later the pleased confidence in We’ll have have. project the is talk the call. acquisition about a synergy and $X.X we results and the up the

markets. tools versus to trailing with Europe The Commercial strong our XX%, review double-digit businesses underlying Turning heat balanced increasing continued Orders both, & Climate XX% geographies continue accelerated across in growth end strength professional to Residential were All growth. by and June prior demand up be sales XX% up and in and chain continued tools. tools. their The Americas the basis, was slide very very all of to markets and year. we’ll broad-based Solutions. across continue products. Residential strong home and showed Sales has three-month orders was up on cold XX, strength. were it driven be professional underlying strong up Technologies were an and and XX%, and pump

XX%, basis which points operations, cost some seeing driven are Asia, that the slide XXX results by Please of to chain Middle talk various Margins over more headwinds East in cost basis and the cold and we done volume adjusted of Africa business. heating points we’ve driven and deliver to I’m the to going what to in a was than turn Ram. this face. going XXX technologies. price he’s that pass up and improved and bit of savings, about strong by And XX. quarter we the to the challenges the EBIT reset EBITDA, leverage adjusted offset by the

Ram Krishnan

our you as our as Steel can peaked labor in continues is record and, prices not of pricing to off estimation, as supply it global electronic Clearly, over at inflation, months has and highs, operating our a global up our consecutive very see, to while prices environment still yet. maneuvered operations. $X.XX increases highs have expeditiously alternatives And commodity pound teams year-over-year. receded defined with remains XX impact challenging Frank. Plastic supply. availability are copper remain maintain have elevated Thanks, record resin

businesses to the into well supply are labor industries times. impacting impact lessened are remain Electronic U.S., availability of the number our our hedge impact lead component carry an and XXXX. the many is in but Our integrated by market, proliferating in the to microprocessors, shortages available issue inflation of And constrained in well. will as of is continues suppliers controllers, positions little businesses, copper our the impacted circuits XXXX. on severely expected linear Very open inventory in platforms, XXXX, and across into of to shortages most both faced terms most be and EMS impacting finally, are over growing,

cities, the unfavorable to of Our Solutions level local V-shaped labor of to note felt that estimated inflation commodity plans. as we has the an sites, many cost to important many No by our in the driven rolling complexity a operational constraints Residential quarters. labor of is quarter. It price of impact remains and million disruptions demand be our next tight businesses, Commercial change, & our in $XX recovery added but waves COVID last in at competition as impact new expect we maximum two markets

Now, some turning customers. environment despite XX, these slide to to they nimble outstanding challenges, chain to results operational date the supply deliver combat to global the by of in I’d creative highlight operations and these help our like serve remain work phenomenal flexible, needs as our teams and and to of dynamic a challenges

tirelessly to in Our ensure have worked supply material chain this supply teams of to global environment continuity plants. our

many chart, on implemented and As quickly creative being basis, see solutions real-time effectively. you a on the can are

our turn for operational as cases, us side we these the up many that, it I’ll record our producing supply to has certainly and, spent capacity global in teams critical and to as outstanding been meet for years of developing, Lal surging sudden demand times. the quarter. to this in-sourcing an through in sincerely both an to supply footprint, global our do on many are full Many at while opportunity of walk plants manufacturing guidance levels advantage want thank address ramping Our well to disruptions. With outlook. elements that challenging to delivering regional chain chain take I over year

Lal Karsanbhai

Thank you, Ram.

now turn Let’s XX. to slide

XX%, the our our based year-to-date continued growth now X%, margins. cost their sales flow our guidance in pace base closer X%. strength underlying X% range to range improving improved the performance. X% business for of Automation profit top to Residential near expect the May outlook Commercial will top We approximately above of the to and We to orders, of the year, on in are be and to sales XX% of strong The May Solutions their volume at through and the at to

enabled capital cash adjusted and spend flow in basis the $XXX performance now EBITDA change to previous margin increased Our approximately the no and XX%, are by working respectively. and rate, restructuring, increasing to adjusted estimates and above XX% capital guidance, There’s EBIT estimates, points which XX tax our profitability flow or million. an cash both of Strong free dividend. by operating increase X.X%

also minus raising are to We adjusted guidance our or EPS $X.XX, plus $X.XX.

the in price/cost $XX for highlighted. that QX at covered currently and were million, Our remains challenges XXXX as despite estimated headwind current Ram

We continue a as them. increases described price Stock next Ram quarters, $XXX the million. impact through we market that actions, recent be to to but containment, this compensation two the will developments manage challenge through navigate selective

now, power XX% site some recovery, KOBX maintenance and momentum. KOBX see activity biofuels. are recovery and very three in the and to be band business, Automation hybrid Solutions process North over with XX, of orders we’ve the update while months. from through to automation that order to trailing the really deferred I’ll America. that and most continuing three So, to chemicals, in particularly be markets, KOBX Residential chart order turned Commercial and three-month to and we in & continue Americas the materialize, markets residential, in continue and demand & very and second XX%. of to and momentum we’ll see The continues cold drove frame Emerson’s last up strong high-teens climb environment in in higher professional in chain strong, but very last go as you sharply in gave tools the access to just positive especially later rates Solutions the we experienced Discrete have we are Residential run quarter, Automation strength near driving Solutions see June. Commercial Solutions beginning cycle to average strengthened, the all their

as commented have to continues Finally, extremely quarters, strong. be momentum past life in we sciences the

approximately year QX land Let’s now just XX% review of sales the high up driven expectations Residential end X% X% digits The single Full are versus by to double-digit year, exceeding fourth as underlying expected on of the top at X% is to XX, well as America underlying billion. North I’ll discussed. sales sales chart guidance prior the the to growth between of outlook. the in recovery our and & prior underlying were turn in Commercial and Solutions range. and quarter X%, expectations, low strength sales to $XX.X management our

of the as we business see to America the to as residential the expect North well Automation in year, in broad For remainder commercial continue solutions. Solutions recover strength continued

However, of supply the will impact labor chain challenge. be and issues a

turn to slide geography. and now by our outlook XX, I’ll review Let’s

As and flat and we Residential Commercial between Solutions expectations. underlying driving to X% X% be the Solutions mentioned, full Frank expecting XX% overall XX%, sales year, to Automation be to to us for are to sales & X% our

Americas. four XX% with to showing from hybrid. the fiscal and approximately led in expected increasing uneven returning continued strength domestic upstream. some is reduced Process by and by across strength strong recovery, starting strength growth, some broad-based in So, continued in discrete investment in off Quarter Automation in is although at recovery Solutions demand, industries, offset be all restraint midstream oil

that in from season. spend In pandemic shutdown turnaround strength mining industries, site increasing we expectation expect continue. maintenance For strong fall see the spend particularly, deferred pent-up to Latin KOBX, America, that are access will expected we and to an for continued with has a see been for

in Commercial will as well in growth on power, robust and chain side. low life downstream continuation pumps the ongoing mid-single-digit tools recovery HVAC the residential for see strength side automation tools Residential Residential professional midstream, of the in the Europe to biofuels as demand are and continue. sustainability expected and momentum drive home QX. will and On markets, starts sciences & as heat and see in trends, well in wins will by continue in & of professional the to do-it-yourself cold Project the refrigeration demand seasonality driven market to QX. business, Commercial as

Turning and Africa. to Asia, East Middle

level healthy seeing is trend positive project life in the business semiconductors a automation activity nuclear, for and Middle Asia East. spending site and in sciences marine, Our

we organization, in side, restrictions cold are the a solutions. region, part the On seeing with across the the of continue Commercial & and the challenge commercial specifically particularly this world. commercial across AC Ongoing COVID to recovery chain Residential be

chart funnel to turn now review XX, business for we’ll the Automation and Let’s Solutions.

million commented very billion, this So, and back this our LNG who to should some watch that notably booked February, February, carefully. funnel traditional those one is and Mexico. $X.X in be Since that we of projects, $XX of in we project something familiar most have large you was approximately

projects at projects. XXXX removed were February renewable from donut New projects fuels, funnel. the the XXX while LNG in and of valued The funnel oil can clean see diesels, And hydrogen, below refining billion the and mining mostly now our and lithium added mix include and August is funnel gas pies, projects, you downstream industry traditional since approximately projects. $X.X

because depicted generally business. our increasingly in We our over so billion. into funnel on at combined funnel. sustainability these the below Today, projects are chart, our $X.X definition where worth grow traditional this The -- relevant potential of funnel projects. to have $XXX though mix and funnel diversify approximately classifications, now these the new our new we And that is opportunities for than valued are time. identified and nature decarbonization to opportunities. working is project XXX have smaller And They’re are the combination being our of projects they view industry million traditional the added to as

smaller more value opportunities the but differentiated of acquisition, compared we funnel, the with business us foothold are On different is our our are an recent transmission definition, for our strategically opportunities purposes opportunities project Generally, to large these distribution and these billion side and numerous traditional The traditional characteristics of although XX% space. some The These of that have they right billion XXX expand are the and from value America and XX% million, we $X automation and keeping and new Overall, of therefore, gave introducing funnel a are outlook into perspective greater are into $X.X slightly bullish clearly is, ahead, is separate how $X.X and global, have our billion of To project the important and which as made opportunities discussion scale and funnel it overall projects. today. than chart, approximately it on of the $X Europe. of give opportunities in OSI important. diversify million strong we $X on $X spaces. between North it and project million. has approximately I’m we is you it is up

turn to a chart Now, is being showcase, enterprise. plan important XX. very This in well is across let’s cost chart. financial our reset incredibly And robust executed as mentioned results Frank the our

approximately this to of $XXX million targets As plan be $X EPS. in It XX% by margins adjusted savings. and million introduced in realized $X.XX over a began comprehensive and XXXX midrange involves also In we February, reminder, in late our EBITDA in spend will XXXX. adjusted fully and $XXX

very much those are We on track targets reach XXXX. to by

think headroom Importantly, particularly investments, technologies I’m about key this, of creating that for outperform is enable term. business critical and as some however, our I outperformance end over to the long and momentum recent XXXX the excited through about particularly the will

how revenues, which and meets right all on cash side our in I’ve Greenlee hand measurement underground in expectations this and below to we’re for as will acceleration come tool This next-generation business, are next Gemini, solutions our our investment being performance over performance integrated in managing which can depth remote is which device process drives than flow four you safety thinking months outlined in The And increased our you. the in the next-generation we’ll are which history to the an safety examples air significant will are these award-winning the and new lastly, pressure to and investments. cables. the and Plantweb and out Copeland call obviously investments. drive The chart, Q&A. product refrigerants. the outlined is and has XXXX have in As electronics, February performance. cutting Thank systems over and XXXX conditioning for turn the that, very KX see, business. largest cutters, February thing Those optimized enabling the of developed of which about the I efficiency temperature technology with margins operational we’ll platform, and enhances better regulations examples and insight. the unmatched And unifies begin people data, operational operator, our Optics, scroll,

Operator

with [Operator We will session. now question Please go Mitchell begin comes Instructions] Barclays. The first the ahead. Julian question-and-answer from

Julian Mitchell

Hi. forward working with I to And look Good you, morning. Colleen.

I of, sort of Solutions revenue terms Lal, In Automation outlook. suppose,

a medium in funnel lot slides. growth rate? your So, Auto an XX CapEx oil gas or of good in backdrop, comments stable like of sort mid-single-digit a sort and is term of guidance Sol very since take good February as ongoing into of type take of and sort organically. It quarter in of maybe the we subdued should sort color embedding sort that next that Auto months placeholder growth we When fourth in type Sol the mid-single-digit terms the a looks of together

Lal Karsanbhai

Thanks Good the Hi. you. question. Julian. Thank for morning,

some I by fair. has KOBX, think facilities. There spend not been what’s that’s fueled been, to has us Look, across forward. modernizations as going indicated, largely recovery and going the MRO that’s drive but I

think, two I segments is of from of assumption. fair -- continue. And into is, expect into -- -- that’s those business sales in the think would I that I would I what So, conversion the think guidance orders a

Julian Mitchell

it sort And how much the or then, to sort price-cost headwind And falls that fourth of the of we of pushed look the $XX aspect, into at when the incremental margins margin Res six maybe million maybe quarter. that in switching sort months, price-cost Com of below context, a margin headwinds? sustain does percent XX-plus business that by next clarify get that can

Lal Karsanbhai

on for sides to incrementals The well, is going cost. where as working question Julian. Julian, Clearly, is be the challenge team Great and months. the of Commercial next equation, that’s is X the price Residential in both

structures business we that very the of assertion materials, suggest that’s I the We’re X things challenge a we also and most with continue to is, world as creative that biggest in challenged getting negotiations different few availability But work where major have correct But, areas, customers. next are and moving opportunities that around. to going over the contract the in would is terms our incrementals of sourcing months. go to be your the the from

Operator

Please is The Pokrzywinski Josh with next from go Stanley. ahead. Morgan question

Josh Pokrzywinski

more A questions. more big of some emitters. particularly of some guess, there, context one measure more tick nice mind. extra that push if on kind wouldn’t diagnose, up think I the have hydrogen? term? those which your more you you’re couple add sort technologies, I bigger and on of are of a is on which or you see guess, do tracking legacy decarbonization, pretty improve, there additions, first of of of customers customers Is sort on needle showing be one in up. one mover the those medium on the hand, you of and I -- some funnel the your that here mentioned like more of could folks to mean is to kind of Like, green funnel

Lal Karsanbhai

question. Yes, And funnel. in I think little bit great there’s the a of both

in manufacturing partially significantly are the and feedstock a the feedstock work the the those that driven in are sustainable like green embedded in billion but hydrogen. in basically a there if opportunities, investments. incremental being in I done things think, diesels, the new a the diesel, lot is investments green refining which parts. by other or monitoring that is I already at biofuel What’s And of using you was conversions, that’s think what’s traditional particularly $X.X of look funnel, bar, emissions downstream,

about was If billion opportunity we in talked hydrogen around you framed for XXXX. $X back that recall, February,

those XXXX, into the the However, bring I number the just projects and and million. that a are over we and absolutely our pursuit, as -- which those now you’re process very that the of it $XXX increase we bring business. of to not is and the expect about today. those pursuing time run pursuit more number projects that within -- view we to defined that’s But, right. talking become but more this the to we’re scale We into now these is and why meaningful,

processes. ESG their core those dollars, that sustainability, think, spending all drive midstream conversions to dollars And of optimizing through come and productivity, of integrated all around commitments. emissions, in they’re or the current I our to upstream automations frame incremental customers, the downstream, can reliability, on oil

Josh Pokrzywinski

Got calendar price-cost that of what maybe annually. fiscal you there, a things talked just a pent-up I has Res copper of set price have the about flipping Ram year sets that would maybe know you there’s match particularly or Can Com opportunity well. you But it. the postponing probably the up behind that And maybe in curve those in of the That’s kind more some puts out up I cost. the bit like pricing together? things Could what little of slipping about we sort think pricing helpful. side, as of I hedges, kind terms know year. work inflation. of I imagine just some periodically, guys on how talk contracts this you

Ram Krishnan

Yes.

of in it that. take From & October, but of as the diligently. Jan frame. pricing, Lal mentioned, that many happen teams particularly the Many some I’ll So, our working the Commercial OEMs, time will happen a pricing large will with in perspective, are Residential

expect well to quarter. the all underway. our kick in, second way big So, in into And a you’ll that’s pricing

steel the of We’ve modeled copper certainly, through hedges will year. the pricing, copper the flow terms In and that out. through,

steel seeing come well. be as on months the three to six do second steel through that, better outside next to into side, of expect pretty the quarter, going we’ll On the the But, tough. we pricing start

Jan a would is from So, of a lot perspective, say, perspective pricing I frame. our the time modeled in from pricing the

Josh Pokrzywinski

Okay.

appreciate it after Thanks a color, it. both. time the I So, for six-month Understood. frame, is step-up. that bigger

Lal Karsanbhai

you. Thank

Operator

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

Andrew Obin

you bottlenecks, thinking and very well. doing Com can just Restructuring. is specifically resi internal if about Hey. I’m It was of sort seems talk I HVAC wondering

Copeland Do about need to And tools. demand? V-shaped add in with you tools to deal how and capacity it? at talking thinking recovery you You’re are about

Ram Krishnan

Yes.

the We labor in terms position business. we will in are capacity Climate this current but clearly capacity, add point, plan. both the Mexico as locations, are we’re U.S. as are for in fighting Technologies as Certainly, capacity U.S. in well many adding of go as this through our we a at and well as capacity we business where more challenges adding tools both the short-term of

So, the yes. is answer

Andrew Obin

to right? I How it’s guess? But, is constraint constraint, much a a Excellent. growth, not of it

Ram Krishnan

changes certainly, longer-term out outside the model I our at business is of as the a we pipe, down levels, we it’s important It the are current growth for see. that regulation constraint But, the dynamics and challenges not labor coming mean, long-term of the plans.

Andrew Obin

just question. you. Got follow-up a And

you’re specifically now. disclosed impressive trends balance I the Power, software be M&A. there. and in systems I think, you seeing break organic how much would the in growth on mean, -- And And OSI that Can you hone is very funnel down just also what growth? clearly, is

Lal Karsanbhai

Yes.

July. for with So, session very Power. I -- up Andrew, as we just pleased and performance comments, earlier mentioned -- We growth late there the the actually were in Frank of OSI we’re a planning

at plans. So, greatly Management, power this more what the incredibly PWS in we they’re far opportunity than But, seeing a and the actually higher-than-expected large we’ve acquisition. business executing North companies geographically the the well. and the are is to leverage America. to expand the And existing have at higher teams ability Ovation relationships expected management, performing importantly, that across we’re rate time of retained

the relevance important applicability validating for the very and validating technology, customer been So, has us. the

So, things of relevant looking revenues sort. excited. and software outsourcing recurring perpetual and into of a an to software this There as from are there transform into in subscription, terms of focusing business, businesses, to that in measures software vision such pure around and services around a and that of annual terms on build is for evolution is to more this continue play we’re opportunity

So, we’re business. that very the working aggressively within

in but and me. would number be say, data that, seen Jeff, single slightly I suggest I business. rates, management grew understanding, front have layer But, I And heard, digits growth I above the of high that on based would & of don’t would that on But on terms have the Andrew. what In Systems that average. Solutions my

Operator

The Jeff question from Vertical Research. is next with Sprague

Jeff Sprague

all guess, that with it everything. and your here Board a Thanks concluded review process the interesting, about thought it, you strategic is review But, will on the say you you’ve transparency I and it for in October.

of So, instead, any not investment strategic like wouldn’t something large-scale is that I you’re be until cultivating suppose we on on about that or suggests a that the any or that October. you think of of you ways on potentially should said, sitting the kind M&A to kind your an what and diversify in looking and remarks? at vectors as said create a right new you Is and, pipeline Board growth bit. change idea And opening pipeline read

Lal Karsanbhai

pipeline read, Jeff. you It’s this. M&A interesting I’ll an is green. The ever tell

of with we’ve that working aligned We’re portfolio study to are as a speak, and done. the we which related number strategic opportunities

those, later. and this and we’re some Board summer been to So, than speaking through about those opportunities do to excited the sooner about okay. we’ve That’s very month will rather through because continue the come so may

path terms to of to driving the look, sales return of total need in management of the study, X%. performance is that in and Now, multiple to an to growth this higher the bucket believes the team this overall the into underlying And X% increase Company. we fall shareholder the

chewing study same and and are So, as portfolio with optionality the what But, the study current in we’re really our around potential at and the that’s the debates at take place. of really -- invest we walking the focused And to the engagements the the areas, look will the portfolio Board time. gum and makeup those makeup where on. new

as simply pursuing of and details they’re it. much We management opportunities Board, Board, a team the a with the very haven’t we but stopped of the covered as study haven’t because aware

Jeff Sprague

are of the XXXX of make cautioning those growth tempers like thinking targets. bit perspective? pretty then, XXXX that you or there’s targets. correct beat it spending Is glide that right, path that seem Understood. little it and just certainly about investments, to you’re investment the sounds And good But, like of those sure a the beyond kind potentially upside of a us on Thank kind kind a the you. hit bias would

Lal Karsanbhai

path hit those have a described. is Honestly, we we’re this -- there hard engaged. Jeff, targets, experiencing work quarter way Ram to generous. of labor and as obstacles in the are always Frank everyone materials, lot glide experienced and by with No. There’s as as And

So, organic it’s get the we organic need work we we to work portfolio opportunities to those elevate make the but a hard have to only ball. the not minuses, our -- of there, lot need have Having and and with investments the sales eye to I of off investments with for the growth do to that, that, we said taking future. that And mentioned not and just we’re pluses Company. take the

So, it’s both.

both. We do have the capacity to

advantage to do like we’re opportunity have taking We both, businesses. many the And full that. of

Operator

Nigel Coe go Wolfe Please Research. from The with next ahead. question is

Nigel Coe

we’re to Lal, So, close getting ‘XX. fiscal

that’s levels the But, phases the the the Is for I’m profile process. in early going through type changing of in see anything or normally, we funnel planning double-digit solid suggests that of here So, just and backlog is not growth of that activity ‘XX you’re there recovery, to the anything building the Can at front-log in given terms automation. know automation, or I time? double-digit growth that automation? be we in case going that’s expect curious,

Lal Karsanbhai

one, couple Yes. your And the very have carefully up was through in question of back go watch hear you We this from this that’s very the KOBX Hi, an going ‘XX component, And to ‘XX. important thoughtful to in A benefited element. automation, in to we surely great which last voice. the subdued Nigel, actually. benefited it’s growth there if cycles to We cycle, prior the the from in that that be date. which run in in run. differentiating. is to But ‘XX been

is underwent Now keep that in that we market. by investment absorbed in significant just the mind a LNG being

sense one you. to single opportunity double-digit yet organic would of type Automation the suggest -- digits go. to Solutions, have and big I’d be that -- high But, between that We that in large differentiated it’s if that the makes project the

Nigel Coe

coming as given color emphasis on the acquisitions And to acquisitions you’ve portfolio, fair and disposals? October Thanks pitch, top smaller opposed couple disposals. I it is clear. focusing absolutely on guess, but that or It more in question and for the you’re Board on does. But material I loud Jeff’s disposals, of of to then, just of there. heard diversification, on here terms know say a that the done

Lal Karsanbhai

I’m we is, announced Daniel of going divestiture gas And you tell oil it’s and Yes, the both. to the business. what

support. to fluid opportunities divest. to element going we’re We acquire the both this have It’s got from diversification both and/or underlying oil the of buttons. around to and with those to terms both. solve, press sales Because in the equation portfolio, it’s elevate Board of opportunities And and/or to an the company, with yesterday. a whether conversation their it’s looking that growth We’re of gas at very of

Operator

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

Andy Kaplowitz

worried Well, bit this talk at Difficulty] a enduring, I of longevity point? of about how think Residential the the thinking cycle about you this Obviously, toward can about were end the & you year. Solutions [Technical you’re Commercial comparisons relatively residential

So, chain improvements well into as you you in see tools? cold construction, go as commercial continue thinking about and as you enduring the to are ‘XX strength how residential

Lal Karsanbhai

Great.

the tools professional So, and driven businesses. -- products growth, climate side it of the be the which see Greenlee, piece what our I by that capital rigid we and into tools in it tools by they’re cycles, a mid-cycle three automation tools. of impacts professional residential that the the really will bifurcate dissimilar has home investments spend, client, the partly piece. the But the some our to of investments, set similar not tools, do-it-yourself infrastructure experiencing the the the different area, two Obviously, driven in pieces, professional the cycle, we’re

carefully, as those, those XXXX. very is I watching And so air have conditioning residential I The the cycle. And opportunity sustained go we’re climate, as orders. look think, we’re we well at into watching one

carefully. do residential close in for it more our we season. Ram, we’re subdues seen go go customers, that that OEM I commercial seen subdued it you’ve have color as we carriers any perspective partly But, that I and their of now, with world comes. trains the already watching would turned, and from more in we’ve very give? our the But terms expect make would as But driven the staying driven understanding you a know in has fall and that’s quarter trailing very cycle into residential We’re sense AC entirely to communicating, -- business. and order an of the by that demand.

Ram Krishnan

spot that’s I on. No, think

Andy Kaplowitz

at in know. focused we And you there. Lal, solutions, margin margins program, has for we in well tailwind, strong your your you But and you to C&RS. business talked continue beyond? been being then, generate And average Solutions incremental margin that as know cost-out margin I given already drive continue which program to incremental margin ‘XX talked going look on or could into be as continue forward, Automation about should about better-than-average cost-out automation pressure to

Lal Karsanbhai

think approaches team the it about quarter, I business business XX% that the people customers. XXXX way platform is and the significant way so, this around I has than The begun there. in and in in incrementals technology and goes their different Andy. it and the We structurally today, took printed the investments way their on manages that it

obviously there’s lot target I’ve given than there. go see business higher as we’re likely is and we So, a of room of I The XX% forward. But, types to is those such, the incrementals. think we investments as up numbers ramp

Pete Lilly

Scott Davis. is are next from question our think, Scott, you I there?

Scott Davis

messed yes. here, clarification issues. if but I of up a whatever, or I’m couple we morning, Good don’t guys. know

you calendar are Lal, do of of well still Just, that you to I’m kind you if price-cost parity in, about kind headwind think to the just into in of cadence get backlog, kind when think fiscal XQ? or a fighting your is a about how next number trying year?

Lal Karsanbhai

quarters most bleed It the fiscal. the Yes. challenging, next described into is Ram as which does being next two the right.

calendar first So, of first -- that our our parity fiscal in me, really arrives excuse ‘XX.

fiscal of ‘XX. second So, our

Ram Krishnan

Yes.

Scott Davis

Okay.

to again, said and you other cost the I actions, there to Sorry such. I start asked if just question that on a And CapEx the I given need reduction Board review, it hear you are or Andrew that guess, you suppose, need think you -- start overall? and the money had it. of But, do largely can you the just which clarify is do I in more -- direction, complete, and big spending actually about size just going adding to backlog then, didn’t before,

Lal Karsanbhai

No.

answered Ram that think, well. I

in have in optionality footprint part reset existing I looking plan. we’re and the at we initiated as around cost that capacity of think increases footprint the the

Eastern India, those and all size underway. in in operations in of significant have construction We Mexico are Europe, and in

early Some XXXX. others will production year, in begin this later

thematical and basis And across not what there, fighting really for the which labor availability from Scott, we’re feel United anyone we and daily constraint honestly challenge facilities. is not of the a us, dissimilar me, in So, States. most the out single to our good. is biggest that’s on The

Operator

The with next Morgan. Tusa ahead. go from question is JP Please Steve

Pete Lilly

It looks like we may have lost Steve.

us? you Dray. move we call to Deane like with on next It from next is next Deane, question? So, -- our can question the looks are

Deane Dray

whole too. I I missed Yes, am. that introduction,

that’s the reason delay. So, for the

morning. Good that. about Sorry

looks three-month us of would color So, just And there. is growth? the on you like underlying XX, any to give some whole color kind Solutions orders, be because it July pivoting on July, helpful Automation can page

Lal Karsanbhai

the number I I Deane, with me, you, to line excuse here. don’t I -- assumption. tell think fair That a is you, somebody would on but a have came share that

in see world to markets, to in continue of good we carefully, by Automation particularly Southeast parts Europe, we’re increased But, We Asia Solutions. and see India. the driven order momentum, large and momentum Obviously, watching significant KOBX China, continue and America KOBX. North

Deane Dray

like on Solutions, Copeland, segments, into longer-term price And on the Ram pricing? contracts. us, one color then, call I been really of portion the much the on commodities, good on cetera, know cost question as color Got you et is for labor, not it. Commercial two from focus on the on has second inputs, here, in more the Can the on Residential headwinds locked realization. but give focus And especially &

would be So, here. just realization color helpful price

Ram Krishnan

Yes.

has off, year. will dynamic first getting on and price-cost year, I’ll green and So it question price relates as automation continue that disciplined with very, been this into very answer been to in the has -- next automation,

relates side business, side, Commercial business. particularly unlocking of is or in no automation a function will it which the frame as contracts, the significance. Residential climate our on price the we of start realization, & So, in long-term of the see to time issues price-cost on And price the OEM the January

the to will second next the go have the turn, but into category ‘XX, of them year. in into the start we in effect quarter commodities in softening, into that turn pricing green big October, Now, fiscal start see of do quarter will the impact we which second will assuming

time it. contracts, which the So, on up we lot in that’s open Jan how A our rides frame. see

Deane Dray

Got it.

So, you said but year, answering the fiscal at second I... quarter your in parity like next you first fiscal it in be Did would quarter. question, earlier sounded

Lal Karsanbhai

I corrected say... myself there, Deane, did I and

Ram Krishnan

second. The

Lal Karsanbhai

fiscal. second calendar, First

Operator

Tusa ahead. is Morgan. question with Please Steve JP next go from The

Steve Tusa

you Can hear morning. Good now? me

Lal Karsanbhai

Yes.

Steve Tusa

Sorry.

call You guys usually in have the the afternoon.

days. I sleep these So, in

So, Q&A. -- just a for I during there the was asleep I fell second

price-cost some clarify remind price-cost, been what of quarter? what us what of has then, to Just that’s the in was it been? year-to-date? Just And this

Ram Krishnan

So Frank, you got that?

Frank Dellaquila

Yes. this I -- in Frank mean the about price-cost negative quarter, enterprise is total Steve, $XX roughly million. is --

half. see and the first the year. have as third. of through and right magnitude Lal We’ll that we’re to it both of the in million to positive were order work we quarter next around Ram said. have So, quarter, And in in first that through But, fiscal was going the the fourth intensifying second $XX

Steve Tusa

negative? Of Of negative?

Frank Dellaquila

Negative. All commercial in residential.

Steve Tusa

Right.

a this ops? your So, already pretty you’re amount like in absorbing decent quarter

Frank Dellaquila

that are. platform. we is about Yes, Yes. just investing This in

Steve Tusa

comfortable time. out would intermediate growth can expect margins, mid-single-digit the over -- the go-forward incremental some on over just Lal, business kind margin What normal you underinvests. clear. over it we doesn’t mean, Nobody with every mean, company mean, that throw I I would to on needs that make to you that incremental trying just this way but the is like term? be for the next -- that of that need kind kind to you do, invest. I seem guys rate you expect of and of you out, model Just companies invest. of

Lal Karsanbhai

as go Steve, to long the Yes. that we asset continue through number, I XX% term.

target. You’ll than the businesses. quarters, XX. be where how residential we print that’s we’ll quarters will but the And we’ll we see saw with there as that’s the we And than that with will -- that executed the frame that There commercial be plan, reset as flex as automation, print up we forward and down, higher cost XX. sell

is the it. XX but I’m flex, way thinking about will it So,

Steve Tusa

don’t then, like somewhere Got prior nitpicky years it’s stock number Is that’s that obviously kind massively a know know I -- run does of low-XXX. it. every is that two does the lower? if -- in corporate. last forward, up just were -- few there’s there’s or XXX one. or And maybe for else, historically, like in if where comp I that Is Stock years, this reset is one the comp reset going rate that -- year. the

Frank Dellaquila

not. No, definitely Steve,

is driven to the It’s this stock function it’s related stock a to had the know, entirely year-over-year. stock in XXX dip take, mark-to-market price We year But driven. of a that a that as It’s number, expected, performance like had year the XXX price. you be in last the COVID. As XXX the We’ve big not change from almost price a give range. run rate time. no, delta rate and or should over a more run good

Steve Tusa

Got it.

in orders So, the tailwind. revenue one fourth I of about with it’s a off mean, orders organic sorry, and that points the last guys are in in question of orders but in the slow tougher and there being I an a earlier then, obviously where couple mean, know you The quarter. And I I Solutions? conversion, with a orders Automation don’t kind you’re inflected. fall, why term. just mean, But, coming only turnarounds immediate one. know orders completely of XX% mid-single-digit about growth I would good projection that growth basis hundred talking was comp, equal the It’s comp,

why that Is timing, something or whatever? mean about to I guidance? X% like from just around there midpoint X% that the COVID is at go of would the that conservatism So, or

Lal Karsanbhai

the And labor more order-to-sale to it The Steve, fourth is challenge a it’s COVID, to enough I plants? terms me and think I Automation conversion And convert the Solutions particularly order band, guarded -- hand-to-hand in of of we it. side. arriving bit a that combat. guided is in the momentum Well, that our in is, little materials, in question keeps a it’s more and material ability in that as of think that have quarter. what the emphasize terms the availability electronics, And there’s less can’t -- within that we the are so I convert business. can on so

Steve Tusa

Right. that’s And ability kind hundred your dollars think couple million you of difference in of of a like to kind fulfill?

Lal Karsanbhai

I know. the is. it what know million around I range. probably to don’t It’s $XX really don’t $XXX million Well,

Steve Tusa

Yes.

quite guys. bridge I Still All Okay. gap, Thanks, the that’s but doesn’t it. right. appreciate helpful.

Lal Karsanbhai

Okay.

Operator

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

Gautam Khanna

I a couple. had

are your project sales? what that? fiscal just stays comments KOBX is funnel on a percentage at ‘XX, similar fiscal of it that the First, based you mix ‘XX pretty Sol, was as Auto on thinking to And the what in

Lal Karsanbhai

Yes.

the But is move carefully that moves that the forward moves the how that forward I’ve the Colleen forward. of XXXX. renewables gone folks funnel plastic do fund watch in are that right different be that X% and into to or be shown resiliency And larger, base. our level. of very the last be the different, described the the differentiating the projects, I -- Field the move decarbonization that, biofuels, forward as and it’s said transmission has part expansion, remaining that smaller of from at through funded about funnel the Having the particularly the think, a so, to got six differentiating as The all what a that of to our it types we’ve convert Gautam, high ability XXXX how we about North that obviously months jobs, and projects So, staying for of I seen is aggressively. customer we’ve distribution makeup the Qatar confidence, -- that it funding then actioned. we’ve renewables into from that’s to Automation big aggressively, got funnel left, LNG propylene the be one could does the degree and element to one, to greenfield those projects moves [ph] will Solutions. successfully, investments, think movement as watch conversions, What head sustainable, have

Ram Krishnan

were KOBX mix it’s you the that addition in the And the to the And if probably several about low-XXs next we in quarters, at into the Gautam, funnel, high-XXs. for range operate XXXX. into expect asking to

Gautam Khanna

organically, next we’ve seen follow-up strength Okay. That’s the year, of aggregate this as in do the earlier fiscal? very grows the questions outsized just And that C&RS, kind helpful. business at a think of you one to given

Lal Karsanbhai

the and Gautam. the the is ‘XX billion. that’s cycle. so, And that across numbers . residential will in what we business to that the And in that’s organic seen growth in the drive what going the impetus backlog support to, you’ve happens believe is are I what $X.X the And -- AC the today, situation despite at for organic growth, business

Ram Krishnan

The longevity of our commercial businesses as well.

Gautam Khanna

Okay. comments over couple just years? how our M&A portfolio. for should next to in earmark much and the change models we your question, M&A on Last of Any

Lal Karsanbhai

number we of Yes. mentioned activities We’ll are underway. is we come Obviously, with fluid right a things. as as guidance now. funnel think out about at earlier, -- very I our There’s Gautam,

but, give out of some into as kind come guidance we go November. -- so, we’ll in And you -- we as

Gautam Khanna

at? are are differently, bigger than large looking any guys properties, OSI that there you. Said Thank you

Lal Karsanbhai

yes, looking -- a we’re in now, right will in bolt-ons I I the range. that Yes. the larger we more suggest would Gautam. are than there’s

Operator

ahead. final Our Credit questioner with go today is Suisse. Please John Walsh

John Walsh

you sit there, demand before no around of delay thinking just for they’re caused to where about moving and I clarity up and projects, activity waiting they’re mean, in kind U.S. that in going customers in renewables these of ahead we OSI Power seeing going there. A but there’s grid pay forward a states there projects, it? covered, some picked Spain the is given and that the your more by lot there’s customers stimulus enough of Are ground the couple for or who’s maybe with

Lal Karsanbhai

there Aging the think there. it’s for advent need grid latter, renewables absolutely. are think that kinds the on stimulus to infrastructure, I overwhelm drivers all I of challenges, just No, of underlying are spend that the strong causing

traditional incredibly and infrastructure bill, Western and about underlying in particularly benefit. in is will in there’s we’ll States the no doubt it, But America. North United the Europe demand utilities, So, strong particularly help, as

John Walsh

was or you there wouldn’t there’s supply ship were question have think that why Just of grow delayed kind backlog. do then, been kind to of just stuff and some And able chain of to was you or growth, around you Great. if sales grow chain. that backlog and chain maybe back understand circling earlier supply sales to to an that’s backlog? because supply trying deferred sequential there Did Your you demand-driven, able backlog? some

Ram Krishnan

Certainly, to I primarily the the the is both. both side parts think the and And of many in business strong. side. backlog, platforms, on Solutions not and the we was given very on Res, able the the commercial Automation supply in electronic Com fully labor demand execute of elements constraints answer on automation side some were on

driven backlog by So, the was fronts, and both demand. growth supply

Operator

would closing our back the I concludes question-and-answer any for Lal conference like session. over Karsanbhai turn remarks. This to to

Lal Karsanbhai

Well, thank your you us. and time Thank you, for confidence very in everyone, much.

our next I forward and we’re well. go about healthy as And the through Thank many look And safe, quarter you seeing stay the next So, of we you. to three stay and until call, months. ahead. excited

Operator

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

You disconnect. may now

Emerson Electric (EMR) 4 Aug 212021 Q3 Earnings call transcript