Emerson Electric Company is an industrials company that offers hardware and software solutions to commercial and individual consumers. They offer automation solutions for the food and beverage industry, the oil and natural gas industry, the pharmaceutical industry, and many other industries. They offer solutions like thermostats, heating/AC solutions, gas valves, and other products for commercial and residential consumers.
Why You Should?
- Emerson Electric is a great automation play in an investor's portfolio. Before the Pandemic, companies of all sizes were looking to cut down their workforce and/or increase their operating efficiency by automating their operations. This demand will benefit Emerson Electric as the company is starting to specialize in automation.
- The COVID-19 Pandemic has increased the demand for automation solutions. Companies want to further cut their costs and make their factories safer and more reliable. The virus has shown companies that factories that make essential products need to be more reliable and not be impacted by factors like the virus. This incentivizes companies to develop their supply chain.
- Emerson Electric is an industrial powerhouse, an industry that gets impacted the most during tough economic times. However, the hopes of a COVID-19 vaccine and the relaxation of government regulation around the virus will continue to strengthen the economy. This will benefit the company’s future growth.
- Emerson Electric has continued to innovate in the automation space. They recently acquired a company that specializes in automating energy controls for hotels around the world. They have also acquired Open Systems International, a company that provides real-time management solutions to several industries. This will benefit the company’s future growth in the automation space.
- Emerson Electric has seen rising revenues and profits over the past couple of financial years. This has helped them innovate around their products and have also aided them to build a stronger balance sheet. A strong balance sheet will help them go through these tough economic times and will help them raise money for their future growth. In the financial year of 2019, the company reported revenues of around 18.4 billion and profits of around 2.3 billion. Both of these metrics are higher than what the company reported in the financial of 2018 when they had revenues of around 17.4 billion and profits of 2.2 billion.
Why you Should Not?
- Emerson Electric faces tough competition from other large companies like Google and Amazon who are entering into the automation industry. Other industrial companies like General Electric, Rockwell, and Honeywell also offer automation hardware and software solutions to commercial and residential customers.
- The COVID-19 Pandemic has reduced investment spending by companies who are raising money to not go bankrupt during these tough economic times. Weaker economies reduce overall spending for industrial solutions and this will negatively impact Emerson Electric’s sales and other results until economies return to normal again.
In my opinion, I think that Emerson Electric’s expansion into the automation industry will greatly benefit the company’s long term growth due to the high demand for automation technology solutions. A stronger economy and continued innovation will further benefit the company. However, stiff competition as well as weak global economies caused by the Pandemic has hurt the company’s sales.