Emerson Electric Co. (NYSE:EMR)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibits fluctuations over the analyzed period. Starting at 2,212 million USD in 2014, it increased significantly to 2,871 million USD in 2015, followed by a substantial decline to 1,731 million USD in 2016. Subsequently, it experienced moderate growth, reaching 2,461 million USD by 2019. Overall, despite the volatility, there is a recovery trend toward the end of the period.

Cost of Capital

The cost of capital percentage shows minor variations throughout the years. It began at 15.86% in 2014 and slightly decreased to 14.93% in 2015. Thereafter, it edged upward to peak at 16.37% in 2018, before a slight decrease to 16.06% in 2019. This relative stability around the mid-15% range reflects a fairly consistent capital cost environment.

Invested Capital

Invested capital shows a downward trend during the initial years, declining from 17,628 million USD in 2014 to 15,181 million USD in 2017. Afterward, it slightly increased to 16,266 million USD by 2019. This pattern suggests a period of divestment or asset reduction followed by a cautious reinvestment or growth phase.

Economic Profit

Economic profit was negative in four of the six years, indicating challenges in generating returns above the cost of capital. It demonstrated a positive profit of 284 million USD only in 2015. The largest negative economic profits occurred in 2016 and 2017, with -783 million USD and -679 million USD respectively. By 2019, the economic loss had decreased to -151 million USD, suggesting an improvement trend but still underperforming relative to capital costs.

Insight Summary

Overall, the data reveals a company experiencing volatility in operational profitability and economic returns, coupled with a gradually stabilizing cost of capital. The reduction and subsequent mild recovery in invested capital may reflect strategic adjustments in capital deployment. While NOPAT has shown resilience with recovery towards the end of the period, persistent negative economic profit indicates ongoing challenges in exceeding the cost of capital, highlighting areas for further efficiency or growth optimization.

The analysis of the financial data for the period from September 30, 2014, to September 30, 2019, reveals notable fluctuations in key profitability metrics.

Net Earnings Common Stockholders

The net earnings attributable to common stockholders demonstrate variability over the periods considered. Initially, there was an increase from 2,147 million USD in 2014 to a peak of 2,710 million USD in 2015. This was followed by a significant decrease to 1,635 million USD in 2016 and a slight further reduction to 1,518 million USD in 2017. Subsequently, the earnings recovered, rising to 2,203 million USD in 2018 and marginally improving to 2,306 million USD by 2019. This pattern suggests volatility in profitability, with a notable dip in the middle years before recovery in the latter two years.

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a similar trend to net earnings, with an increase from 2,212 million USD in 2014 to 2,871 million USD in 2015, followed by a substantial decrease to 1,731 million USD in 2016. Unlike net earnings, NOPAT stabilizes somewhat in 2017 with a slight increase to 1,776 million USD. In the subsequent years, NOPAT rises consistently, reaching 2,124 million USD in 2018 and 2,461 million USD in 2019. This trend indicates a recovery in operating profitability after a period of decline, with steady improvements in the final two years.

Overall, both net earnings and NOPAT experienced a peak in 2015, followed by a decline over the next one to two years, and then a recovery phase from 2017 onward. The recovery in NOPAT appears somewhat stronger and more consistent than that in net earnings. These trends highlight periods of operational challenges and subsequent improvement in financial performance.

Income Tax Expense

The income tax expense demonstrated a fluctuating downward trend over the six-year period. Starting at $1,164 million in 2014, it increased to a peak of $1,428 million in 2015. However, from 2015 onwards, the figure declined significantly to $697 million in 2016 and further decreased to $660 million in 2017. The downward trend continued, reaching a low of $443 million in 2018, before showing a modest increase to $531 million in 2019. This pattern suggests variability in taxable income or changes in tax rates, with a notable reduction after 2015 and slight recovery toward 2019.

Cash Operating Taxes

Cash operating taxes followed a similar overall declining trajectory with some variation. Beginning at $1,394 million in 2014, the amount rose to $1,525 million in 2015, indicating higher cash tax payments that year. Subsequently, there was a sharp decline to $782 million in 2016 and a marginal decrease to $766 million in 2017. The downward movement persisted, with taxes dropping to $737 million in 2018 and then declining further to $619 million in 2019. This trend mirrors the reduction observed in income tax expense, possibly reflecting lower taxable income or effective tax management strategies resulting in decreased cash tax obligations over time.

Total Reported Debt & Leases

The total reported debt and leases exhibited a non-linear trend over the analyzed periods. It increased from 6,834 million USD in 2014 to peak at 7,624 million USD in 2015, followed by a reduction to 5,137 million USD in 2017. Subsequently, the amount rose again, reaching 6,191 million USD by 2019. This pattern suggests fluctuations in debt management, with a notable decrease in the middle period before a moderate rebound.

Common Stockholders’ Equity

Common stockholders’ equity showed a general decline from 10,119 million USD in 2014 to 7,568 million USD in 2016. Thereafter, it increased to 8,947 million USD in 2018, before descending again to 8,233 million USD in 2019. This series of movements indicates some volatility but overall a downward pressure on equity levels during the period.

Invested Capital

Invested capital steadily decreased from 17,628 million USD in 2014 to a low of 15,181 million USD in 2017. After 2017, it gradually increased to 16,266 million USD by 2019. The downward trend in the initial years followed by a recovery suggests adjustments in the company's capital investment strategy or asset base.

Overall Observations

The data reflects a period of financial adjustment, with both liabilities and equity experiencing declines and recoveries at different times. The decrease in invested capital up until 2017, coupled with reduced debt levels in the same period, could indicate an active effort to deleverage or optimize capital structure. Subsequently, the increases in debt and invested capital alongside fluctuating equity values imply dynamic financial management responsive to changing conditions or strategic priorities.

Economic Profit

The economic profit exhibited significant fluctuations over the analyzed periods. Starting with a substantial negative value of -584 million US$ in 2014, the measure turned positive in 2015 reaching 284 million US$. However, it reverted to negative figures from 2016 to 2019, with values of -783 million US$ in 2016 and a gradual improvement in losses thereafter, reaching -151 million US$ by 2019. This trend indicates varying levels of profitability and economic value generation, with the company struggling to maintain consistent positive economic profit.

Invested Capital

Invested capital showed a gradual decline from 17,628 million US$ in 2014 to a low of 15,181 million US$ in 2017. From 2018 onwards, there was a modest recovery, with invested capital increasing to 16,266 million US$ by 2019. Overall, the trend suggests a period of divestment or asset reduction followed by reinvestment or acquisition activities in the later years.

Economic Spread Ratio

The economic spread ratio mirrored the pattern of economic profit. It started negative at -3.31% in 2014, improved to a positive 1.64% in 2015, and then dropped again to negative values for the subsequent years. Despite remaining negative through 2016 to 2019, there was a steady reduction in the negative spread, moving from -4.74% in 2016 to -0.93% in 2019. This trend indicates a gradual improvement in the company’s ability to generate returns above its cost of capital, although it did not achieve a sustained positive spread during these years.

The financial data indicates a fluctuating performance in economic profit over the observed six-year period. Economic profit showed a significant negative value in 2014 at -584 million US dollars, followed by a positive spike to 284 million US dollars in 2015. Subsequently, economic profit returned to negative values, reaching -783 million in 2016, and maintained negative trends through 2017, 2018, and 2019 but with progressively smaller losses, ending at -151 million US dollars in 2019.

Net sales exhibited considerable variability during the period. Initially, sales decreased from 24,537 million US dollars in 2014 to 14,522 million US dollars in 2016, indicating a sharp decline. From 2016 onwards, net sales showed a recovery trend, increasing steadily to 18,372 million US dollars by 2019, although they did not return to the levels seen at the start of the period.

The economic profit margin mirrored the volatility observed in economic profit. The margin was negative in 2014 at -2.38%, turning positive in 2015 at 1.27%, but then fell sharply to -5.39% in 2016. From 2016 through 2019, the margin improved gradually each year, moving from -4.45% in 2017 to -0.82% in 2019, signaling a reduction in losses relative to net sales over time.

Economic Profit

Exhibited high volatility with loss periods exceeding gains, but losses decreased notably towards the end of the period.

Net Sales

Experienced a decline early on, followed by a consistent recovery, yet remained below the initial 2014 level by 2019.

Economic Profit Margin

Varied widely, turning positive briefly in 2015 but generally negative; margins improved steadily from 2016 to 2019, indicating better operational efficiency or cost management relative to sales.

Overall, despite ongoing challenges reflected by persistent negative economic profits after 2015, there is evidence of gradual financial stabilization and improvement in operational profitability margins, accompanied by a recovery in net sales after significant declines. This pattern suggests efforts to enhance profitability and reduce losses have had a positive, albeit partial, effect over the analyzed period.