Emerson Electric Gets An Upgrade From This Analyst As Fundamentals Are Accelerating
- Morgan Stanley analyst Joshua Pokrzywinski upgraded the shares of Emerson Electric Co (NYSE: EMR) from Equal-Weight to Overweight and raised the price target from $95 to $96.
- Since the National Instruments Corporation (NASDAQ: NATI) bid, shares are down 16% versus EE/MI and S&P 500, down 3% and 1%, respectively.
- In the analyst's view, the NATI resolution potentially looks like a win-win for shares.
- The analyst believes that EMR is unlikely to bid above $55/share versus its current $53/share offer or, more likely, will not win the bid.
- Related: Emerson Discloses $7.6B Offer For National Instruments - Reveals Several Private Attempts Made Over Last Eight Months
- The analyst expects orders to accelerate, possibly as peers decelerate or decline.
- Fundamentally, the analyst sees process capex accelerating as other industrial verticals start to moderate based on a comparatively low starting point.
- Project FID announcements and EMR orders potentially soon after should come with IRA clarification in the coming months, added the analyst.
- According to the analyst, LNG and Hydrogen together drive a more than 2% uplift to EMR's revenue CAGR through 2030.
- Derated valuation, multiple fundamental tailwinds, and an advantaged M&A position vs. other acquirers with a higher cost of capital should substantially limit the downside, the analyst added.
- The analyst's bull case assumes greater growth and margin expansion, and has EMR trading at a 21x multiple, a 3% premium to peers.
- The analyst notes that most names above EMR on risk-adjusted risk/reward have substantial U.S. non-resi exposure with rising concerns of a lending freeze, suggesting more downside risk or a higher probability of the bear case than a month ago.
- Price Action: EMR shares are trading higher by 1.77% at $83.73 on the last check Tuesday.
Latest Ratings for EMR
| Date | Firm | Action | From | To |
|---|---|---|---|---|
| Mar 2022 | Oppenheimer | Upgrades | Perform | Outperform |
| Feb 2022 | Credit Suisse | Maintains | Outperform | |
| Feb 2022 | Morgan Stanley | Maintains | Equal-Weight |
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