Emerson Electric Co. (NYSE:EMR)

Net operating profit after taxes (NOPAT)

The NOPAT demonstrated a fluctuating trend over the six-year period. It increased from 2212 million USD in 2014 to a peak of 2871 million USD in 2015, followed by a significant decline to 1731 million USD in 2016. Subsequently, it showed a gradual increase reaching 2461 million USD in 2019, indicating a recovery phase after the dip in 2016.

Invested capital

Invested capital showed an overall descending trend from 2014 to 2017, decreasing from 17628 million USD to 15181 million USD. After 2017, the invested capital reversed this direction and gradually rose to 16266 million USD by 2019. This pattern suggests a period of capital reduction followed by reinvestment.

Return on invested capital (ROIC)

ROIC followed a pattern similar to NOPAT, increasing sharply from 12.55% in 2014 to 16.57% in 2015, then declining to 10.48% in 2016. After this low point, ROIC steadily improved, reaching 15.13% in 2019. This indicates an improvement in the efficiency of capital utilization after 2016.

Overall analysis

The data reveals a notable dip in both profitability and capital efficiency in 2016. Following this, both NOPAT and ROIC show a steady recovery trend through to 2019. The invested capital contraction until 2017, coupled with its subsequent increase, suggests strategic adjustments to the capital base that correspond with changes in profitability and return metrics. The alignment of these trends points toward a period of restructuring or operational challenges in 2016, followed by recovery and growth in the subsequent years.

Operating Profit Margin (OPM)

The operating profit margin demonstrated notable variability over the six-year period. It increased significantly from 14.7% in 2014 to a peak of 19.71% in 2015, indicating improved operational efficiency or pricing power during that year. However, it subsequently declined to 17.3% in 2016 and continued a moderate downward trend, stabilizing around the mid-16% range through 2018 and 2019. This suggests some challenges in maintaining peak profitability levels achieved in 2015.

Turnover of Capital (TO)

The turnover of capital ratio declined sharply from 1.39 in 2014 to 0.88 in 2016, reflecting a reduction in asset utilization or sales generation relative to capital employed. Following this low point, there was a gradual recovery to 1.13 by 2019, indicating improving efficiency in the use of capital resources over the last three years of the period.

1 – Effective Cash Tax Rate (CTR)

The inverse of the effective cash tax rate, indicating retained cash flow after tax payment, steadily decreased from 61.34% in 2014 to 79.91% in 2019. This represents a rising effective cash tax rate over time, with the company retaining a smaller proportion of its operating profit after tax. The increase in tax burden could impact available cash flow for reinvestment or debt servicing.

Return on Invested Capital (ROIC)

Return on invested capital exhibited considerable fluctuations over the period, initially rising sharply from 12.55% in 2014 to 16.57% in 2015, then declining to a low of 10.48% in 2016. Subsequent years show a recovery trend with ROIC improving to 15.13% by 2019. The pattern reflects varying effectiveness in generating returns from capital investments, with some years of underperformance but an overall improvement toward the end of the observed period.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes displayed a fluctuating trend over the six-year period. Initially, the NOPBT rose sharply from 3607 million USD in 2014 to a peak of 4396 million USD in 2015. However, this was followed by a significant decline to 2512 million USD in 2016. From 2016 onwards, the profit stabilized with moderate increases, reaching 3079 million USD by 2019, indicating a recovery phase though not achieving the earlier peak levels.

Net Sales

Net sales showed a notable decline from 24537 million USD in 2014 to 22304 million USD in 2015, followed by a more pronounced drop to 14522 million USD in 2016. After 2016, sales began an upward trajectory, increasing to 18372 million USD by 2019. Despite this recovery, net sales in 2019 remained below the levels seen at the start of the period, suggesting ongoing challenges in maintaining prior sales volumes.

Operating Profit Margin (OPM)

The operating profit margin experienced significant variability. The margin increased from 14.7% in 2014 to a high of 19.71% in 2015, reflecting improved profitability relative to sales. After this peak, it declined steadily to 16.44% in 2018, before a slight increase to 16.76% in 2019. This pattern suggests that while the company improved profitability efficiency markedly in 2015, it faced pressure on margins in subsequent years, albeit maintaining margins above the initial 2014 level.

Summary of Trends

Overall, the data reveal considerable volatility in both profitability and sales throughout the period under review. The sharp decline in sales and NOPBT from 2015 to 2016 significantly impacted financial performance, followed by a gradual recovery phase. The profit margin trends mirror this, with a peak in 2015 and a subsequent decline before stabilizing at a level higher than the beginning of the period. These patterns indicate a challenging market environment with some success in operational efficiency and profitability stabilization in the later years.

The financial data over the six-year period reveals several notable trends in key operational metrics.

Net Sales

Total net sales decreased significantly from 24,537 million US dollars in 2014 to 14,522 million US dollars in 2016. After this low point, net sales demonstrated a gradual recovery, increasing to 18,372 million US dollars by 2019. Despite this improvement, the net sales in 2019 remain below the levels observed in 2014 and 2015, indicating a period of contraction followed by partial recovery.

Invested Capital

Invested capital exhibits a steady downward trend from 17,628 million US dollars in 2014 to 15,181 million US dollars in 2017. From 2017 onwards, the invested capital began to rise moderately, reaching 16,266 million US dollars in 2019. This suggests a strategic adjustment or reinvestment after a phase of reduced capital allocation.

Turnover of Capital (TO)

The turnover of capital, which measures how efficiently the capital is utilized to generate sales, aligns notably with the trends observed in net sales and invested capital. It declined markedly from 1.39 in 2014 to 0.88 in 2016, reflecting diminished efficiency during the period of decreased sales and capital reduction. Subsequently, TO improved gradually to 1.13 by 2019, signaling enhanced operational efficiency or better capital utilization consistent with rising sales.

In summary, the data indicates a period of contraction between 2014 and 2016 characterized by declining sales, reduced invested capital, and lower capital turnover. From 2017 onwards, the company shows signs of recovery with incremental increases in sales, invested capital, and improved efficiency in the use of capital, although the figures in 2019 have not yet returned to the peak levels seen in 2014 and 2015.

The analysis of the financial data reveals several notable trends regarding the company's operating performance and tax obligations over the six-year period from 2014 to 2019.

Net Operating Profit Before Taxes (NOPBT)

The net operating profit before taxes demonstrated considerable fluctuations. The figure peaked in 2015 at 4,396 million US dollars, representing a substantial increase from the prior year. Subsequently, a marked decline occurred in 2016, with profits falling to 2,512 million. From 2017 onwards, NOPBT exhibited a gradual recovery, rising each year to reach 3,079 million by 2019. Overall, this pattern indicates cyclical profit variations with a recovery phase in the latter years examined.

Cash Operating Taxes

Cash operating taxes consistently declined throughout the period. Starting at 1,394 million US dollars in 2014, the amount decreased nearly every year to reach 619 million by 2019. This steady reduction occurred despite the recovery in operating profits later in the period, suggesting effective tax planning or changes in tax regulations and rates impacting the company's tax payments.

Effective Cash Tax Rate (CTR)

The effective cash tax rate showed a clear downward trajectory, falling from 38.66% in 2014 to 20.09% in 2019. The most significant decreases occurred between 2017 and 2019, aligning with the period of profit recovery. This decline in the effective tax rate further supports the observation of improved tax efficiency or benefits from tax strategies, which contributed to lowering the tax burden relative to operating profits.

In summary, while operating profits experienced volatility with an initial rise, subsequent decline, and eventual recovery, the tax expenses and effective tax rates trended downwards consistently. This combination suggests enhanced tax management effectiveness alongside a stabilizing profit environment toward the end of the period analyzed.