Stock Analysis on Net
Stock Analysis on Net
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Emerson Electric Co. (NYSE:EMR)

This company was transferred to the archive: financial data is no longer updated!

Analysis of Goodwill and Intangible Assets

Advanced level

Accounting Policy on Goodwill and Intangible Assets

Assets and liabilities acquired in business combinations are accounted for using the acquisition method and recorded at their respective fair values. Substantially all goodwill is assigned to the reporting unit that acquires a business. A reporting unit is an operating segment as defined in ASC 280, Segment Reporting, or a business one level below an operating segment if discrete financial information for that business unit is prepared and regularly reviewed by the segment manager. Emerson conducts annual impairment tests of goodwill in the fourth quarter. If an initial assessment indicates it is more likely than not goodwill might be impaired, it is evaluated by comparing the reporting unit’s estimated fair value to its carrying value. Goodwill is also tested for impairment between annual tests if events or circumstances indicate the fair value of a unit may be less than its carrying value. If the carrying amount exceeds the estimated fair value, impairment is recognized to the extent that recorded goodwill exceeds the implied fair value of that goodwill. Estimated fair values of reporting units are Level 3 measures and are developed generally under an income approach that discounts estimated future cash flows using risk-adjusted interest rates, as well as earnings multiples or other techniques as warranted. Fair values are subject to changes in underlying economic conditions.

All of Emerson’s identifiable intangible assets are subject to amortization on a straight-line basis over their estimated useful lives. Identifiable intangibles consist of intellectual property such as patents and trademarks, customer relationships and capitalized software. Identifiable intangibles are also subject to evaluation for potential impairment if events or circumstances indicate the carrying amount may not be recoverable.

Source: 10-K (filing date: 2019-11-18).

Goodwill and Intangible Asset Disclosure

Emerson Electric Co., balance sheet: goodwill and intangible assets

US$ in millions

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Sep 30, 2019 Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014
Customer relationships 1,973  1,968  1,392  580  1,508  1,594 
Intellectual property 1,565  1,469  1,012  730  1,051  1,052 
Capitalized software 1,334  1,230  1,137  1,071  1,178  1,190 
Identifiable intangible assets, gross carrying amount 4,872  4,667  3,541  2,381  3,737  3,836 
Accumulated amortization (2,257) (1,916) (1,651) (1,479) (2,211) (2,147)
Identifiable intangible assets, net carrying amount 2,615  2,751  1,890  902  1,526  1,689 
Goodwill 6,536  6,455  5,316  3,909  6,653  7,182 
Goodwill and other intangibles 9,151  9,206  7,206  4,811  8,179  8,871 

Based on: 10-K (filing date: 2019-11-18), 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19).

Item Description The company
Identifiable intangible assets, net carrying amount Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Emerson Electric Co.’s identifiable intangible assets, net carrying amount increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.
Goodwill Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Emerson Electric Co.’s goodwill increased from 2017 to 2018 and from 2018 to 2019.
Goodwill and other intangibles Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Emerson Electric Co.’s goodwill and other intangibles increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.

Adjustments to Financial Statements: Removal of Goodwill

Emerson Electric Co., adjustments to financial statements

US$ in millions

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Sep 30, 2019 Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014
Adjustment to Total Assets
Total assets (as reported) 20,497  20,390  19,589  21,743  22,088  24,177 
Less: Goodwill 6,536  6,455  5,316  3,909  6,653  7,182 
Total assets (adjusted) 13,961  13,935  14,273  17,834  15,435  16,995 
Adjustment to Common Stockholders’ Equity
Common stockholders’ equity (as reported) 8,233  8,947  8,718  7,568  8,081  10,119 
Less: Goodwill 6,536  6,455  5,316  3,909  6,653  7,182 
Common stockholders’ equity (adjusted) 1,697  2,492  3,402  3,659  1,428  2,937 
Adjustment to Net Earnings Common Stockholders
Net earnings common stockholders (as reported) 2,306  2,203  1,518  1,635  2,710  2,147 
Add: Goodwill impairment —  —  —  —  —  508 
Net earnings common stockholders (adjusted) 2,306  2,203  1,518  1,635  2,710  2,655 

Based on: 10-K (filing date: 2019-11-18), 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19).

Emerson Electric Co., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Emerson Electric Co., adjusted financial ratios

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Sep 30, 2019 Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014
Net Profit Margin
Reported net profit margin 12.55% 12.66% 9.94% 11.26% 12.15% 8.75%
Adjusted net profit margin 12.55% 12.66% 9.94% 11.26% 12.15% 10.82%
Total Asset Turnover
Reported total asset turnover 0.90 0.85 0.78 0.67 1.01 1.01
Adjusted total asset turnover 1.32 1.25 1.07 0.81 1.45 1.44
Financial Leverage
Reported financial leverage 2.49 2.28 2.25 2.87 2.73 2.39
Adjusted financial leverage 8.23 5.59 4.20 4.87 10.81 5.79
Return on Equity (ROE)
Reported ROE 28.01% 24.62% 17.41% 21.60% 33.54% 21.22%
Adjusted ROE 135.89% 88.40% 44.62% 44.68% 189.78% 90.40%
Return on Assets (ROA)
Reported ROA 11.25% 10.80% 7.75% 7.52% 12.27% 8.88%
Adjusted ROA 16.52% 15.81% 10.64% 9.17% 17.56% 15.62%

Based on: 10-K (filing date: 2019-11-18), 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Emerson Electric Co.’s adjusted net profit margin ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Emerson Electric Co.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Emerson Electric Co.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Emerson Electric Co.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Emerson Electric Co.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

Emerson Electric Co., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Sep 30, 2019 Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings common stockholders 2,306  2,203  1,518  1,635  2,710  2,147 
Net sales 18,372  17,408  15,264  14,522  22,304  24,537 
Profitability Ratio
Net profit margin1 12.55% 12.66% 9.94% 11.26% 12.15% 8.75%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net earnings common stockholders 2,306  2,203  1,518  1,635  2,710  2,655 
Net sales 18,372  17,408  15,264  14,522  22,304  24,537 
Profitability Ratio
Adjusted net profit margin2 12.55% 12.66% 9.94% 11.26% 12.15% 10.82%

Based on: 10-K (filing date: 2019-11-18), 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19).

2019 Calculations

1 Net profit margin = 100 × Net earnings common stockholders ÷ Net sales
= 100 × 2,306 ÷ 18,372 = 12.55%

2 Adjusted net profit margin = 100 × Adjusted net earnings common stockholders ÷ Net sales
= 100 × 2,306 ÷ 18,372 = 12.55%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Emerson Electric Co.’s adjusted net profit margin ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Sep 30, 2019 Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Net sales 18,372  17,408  15,264  14,522  22,304  24,537 
Total assets 20,497  20,390  19,589  21,743  22,088  24,177 
Activity Ratio
Total asset turnover1 0.90 0.85 0.78 0.67 1.01 1.01
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net sales 18,372  17,408  15,264  14,522  22,304  24,537 
Adjusted total assets 13,961  13,935  14,273  17,834  15,435  16,995 
Activity Ratio
Adjusted total asset turnover2 1.32 1.25 1.07 0.81 1.45 1.44

Based on: 10-K (filing date: 2019-11-18), 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19).

2019 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 18,372 ÷ 20,497 = 0.90

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 18,372 ÷ 13,961 = 1.32

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Emerson Electric Co.’s adjusted total asset turnover ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Sep 30, 2019 Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets 20,497  20,390  19,589  21,743  22,088  24,177 
Common stockholders’ equity 8,233  8,947  8,718  7,568  8,081  10,119 
Solvency Ratio
Financial leverage1 2.49 2.28 2.25 2.87 2.73 2.39
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets 13,961  13,935  14,273  17,834  15,435  16,995 
Adjusted common stockholders’ equity 1,697  2,492  3,402  3,659  1,428  2,937 
Solvency Ratio
Adjusted financial leverage2 8.23 5.59 4.20 4.87 10.81 5.79

Based on: 10-K (filing date: 2019-11-18), 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19).

2019 Calculations

1 Financial leverage = Total assets ÷ Common stockholders’ equity
= 20,497 ÷ 8,233 = 2.49

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted common stockholders’ equity
= 13,961 ÷ 1,697 = 8.23

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Emerson Electric Co.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Sep 30, 2019 Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings common stockholders 2,306  2,203  1,518  1,635  2,710  2,147 
Common stockholders’ equity 8,233  8,947  8,718  7,568  8,081  10,119 
Profitability Ratio
ROE1 28.01% 24.62% 17.41% 21.60% 33.54% 21.22%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net earnings common stockholders 2,306  2,203  1,518  1,635  2,710  2,655 
Adjusted common stockholders’ equity 1,697  2,492  3,402  3,659  1,428  2,937 
Profitability Ratio
Adjusted ROE2 135.89% 88.40% 44.62% 44.68% 189.78% 90.40%

Based on: 10-K (filing date: 2019-11-18), 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19).

2019 Calculations

1 ROE = 100 × Net earnings common stockholders ÷ Common stockholders’ equity
= 100 × 2,306 ÷ 8,233 = 28.01%

2 Adjusted ROE = 100 × Adjusted net earnings common stockholders ÷ Adjusted common stockholders’ equity
= 100 × 2,306 ÷ 1,697 = 135.89%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Emerson Electric Co.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Sep 30, 2019 Sep 30, 2018 Sep 30, 2017 Sep 30, 2016 Sep 30, 2015 Sep 30, 2014
As Reported
Selected Financial Data (US$ in millions)
Net earnings common stockholders 2,306  2,203  1,518  1,635  2,710  2,147 
Total assets 20,497  20,390  19,589  21,743  22,088  24,177 
Profitability Ratio
ROA1 11.25% 10.80% 7.75% 7.52% 12.27% 8.88%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net earnings common stockholders 2,306  2,203  1,518  1,635  2,710  2,655 
Adjusted total assets 13,961  13,935  14,273  17,834  15,435  16,995 
Profitability Ratio
Adjusted ROA2 16.52% 15.81% 10.64% 9.17% 17.56% 15.62%

Based on: 10-K (filing date: 2019-11-18), 10-K (filing date: 2018-11-19), 10-K (filing date: 2017-11-20), 10-K (filing date: 2016-11-16), 10-K (filing date: 2015-11-18), 10-K (filing date: 2014-11-19).

2019 Calculations

1 ROA = 100 × Net earnings common stockholders ÷ Total assets
= 100 × 2,306 ÷ 20,497 = 11.25%

2 Adjusted ROA = 100 × Adjusted net earnings common stockholders ÷ Adjusted total assets
= 100 × 2,306 ÷ 13,961 = 16.52%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Emerson Electric Co.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.