Emerson Electric Co. (NYSE:EMR)

The analysis of key financial ratios over the observed periods reveals several trends regarding profitability and leverage.

Return on Assets (ROA)

ROA demonstrates a fluctuating but generally stable pattern, with initial data points from 2014 onward. It began around the 8.88% to 9.32% range in early 2014, increasing to a peak above 12% by the end of 2014. Subsequently, it experienced a decline throughout 2015 and 2016, dropping to approximately 7.5% to 8.9%. From 2017 onward, it showed moderate recovery and reached levels above 10% by late 2018 and early 2019, then slightly declined again approaching 10% by early 2020. This indicates cyclical performance in asset utilization efficiency with periodic improvements and downturns.

Financial Leverage

The financial leverage ratio steadily increased from approximately 2.25 at the end of 2013 to a peak of about 2.89 in late 2015, suggesting a growing reliance on debt or other liabilities relative to equity during this time. After this peak, leverage ratios experienced partial reductions and fluctuations around the 2.2 to 2.5 range through most of 2016 and 2017, indicating efforts to moderate financial risk. However, from 2018 through early 2020, leverage stabilized toward the upper end of this range again, around 2.5 to 2.9, implying maintained or slightly increased use of leverage in capital structure.

Return on Equity (ROE)

ROE displays a similar variability to ROA but with more pronounced peaks and troughs, reflecting the combined effects of asset returns and leverage. Starting from about 21% in early 2014, it rose sharply to above 33% at the end of 2014 and early 2015, coinciding with increased ROA and leverage. Then, ROE declined throughout 2015 and 2016, falling below 18% at times, which aligns with decreased ROA and reduced leverage during certain quarters. From 2017 onward, the ratio gradually recovered and reached above 28% by late 2019 and early 2020, signalling improved equity profitability bolstered by moderate leverage and gradual ROA improvements.

Overall, the financial indicators illustrate a period of growth in profitability and leverage leading up to 2015, followed by a correction phase with reduced returns and leverage. Later years show a measured recovery in profitability metrics, accompanied by stable or slightly increased leverage, pointing to strategic adjustments in capital management and operational efficiency. These trends suggest responsiveness to market or operational challenges with efforts to balance risk and return.

Net Profit Margin

The net profit margin displays a general upward trend over the analyzed periods, beginning with data availability in December 2014 at 8.75%. It rises progressively to peak at 12.83% by June 2019. While some fluctuations are noted, the margin remains relatively stable in the range of 10.0% to 13.0% after 2014, indicating improved profitability. The data for the last recorded period in March 2020 shows a slight decrease to 12.04% from 12.55% in the prior quarter.

Asset Turnover

Asset turnover ratios are available starting December 2014 and initially remain close to or above 1.0, indicating efficient use of assets to generate sales. However, from March 2016 onwards, the ratio gradually declines, hitting a low of 0.67 in December 2016. Thereafter, the ratio fluctuates moderately between 0.76 and 0.9, suggesting some variation in asset utilization efficiency but no strong recovery to earlier higher levels. The ratio in March 2020 slightly decreases again to 0.83.

Financial Leverage

Financial leverage exhibits a generally rising trend in the early periods, increasing from 2.25 in December 2013 to a peak of 2.89 in December 2015. After a temporary dip to 2.16 by March 2017, the ratio fluctuates between 2.16 and 2.89, trending upwards again toward the end of the period. The leverage in March 2020 is recorded at the highest level seen in this dataset, 2.89, indicating an increasing reliance on debt or borrowed funds relative to equity in recent periods.

Return on Equity (ROE)

ROE begins in December 2014 at 21.22% and shows considerable variability but remains consistently above 17%, reaching a peak of 33.99% in December 2015. After this peak, ROE declines significantly to under 18.0% by mid-2017, then steadily recovers to levels exceeding 27% in late 2018 and early 2019. The last reported quarter of March 2020 shows an ROE of 28.79%, reflecting a strong capacity to generate earnings relative to shareholder equity despite some volatility throughout the period.

Overall Summary

The financial data reveal that the company has improved profitability over time as seen in higher net profit margins and robust returns on equity, despite fluctuations. The declining asset turnover ratio from 2016 onward suggests some challenges in asset utilization efficiency. Meanwhile, financial leverage has generally increased, indicating greater use of borrowed capital, which may impact financial risk profiles. The interplay of these metrics suggests a company that is maintaining profitability and shareholder returns while adjusting its asset deployment and capital structure strategies over the observed timeframe.

The analyzed financial ratios over the quarters reveal several trends and insights regarding operational efficiency, profitability, and leverage.

Tax Burden

This ratio shows a general upward trend from around 0.62 in early 2014 to approximately 0.81 by March 2020. This indicates a steady improvement in the proportion of earnings retained after tax, suggesting increasingly effective tax management or changes in tax rates benefiting the company.

Interest Burden

The interest burden remains relatively stable over the period, fluctuating narrowly in the range of 0.91 to 0.95. This stability reflects consistent interest expense relative to earnings before interest and taxes, suggesting controlled debt-related costs despite fluctuations in financial leverage.

EBIT Margin (%)

The EBIT margin exhibits variability but generally remains between 14% and 20%. A notable peak occurs in mid-2014 with values exceeding 18%, followed by some decline and subsequent stabilization around 15% to 17% in later periods. This indicates some volatility in core operational profitability but with no sustained decline over the examined timeframe.

Asset Turnover

The asset turnover ratio decreases from just above 1.0 in early 2014 to a low near 0.67 in late 2016, then recovers gradually to approximately 0.87 by early 2020. This pattern suggests a temporary decline in the efficiency of asset utilization that improves over time, possibly as a result of strategic adjustments or asset base optimization.

Financial Leverage

Financial leverage increases steadily from about 2.25 in late 2013 to a high near 2.89 by early 2020. Fluctuations exist, including a dip near 2.16 in early 2017, but the overall pattern represents a gradual increase in the extent to which equity is leveraged with debt. This may signal an increased reliance on borrowed funds to finance growth or operations.

Return on Equity (ROE, %)

ROE follows a generally positive trend with significant volatility. Starting from around 21% in early 2014, it peaks near 34% at the end of 2014 and then declines to lows around 17% to 19% in subsequent years. From 2017 onward, ROE gradually recovers, reaching nearly 29% in early 2020. This trend correlates with changes in tax burden, EBIT margin, and financial leverage, reflecting the combined effects of profitability, efficient use of assets, and leverage on shareholder returns.

In summary, the data display an overall improvement in tax burden and ROE, supported by a stable interest burden and increasing financial leverage. The asset turnover ratio indicates periods of decreased efficiency with partial recovery, and EBIT margin shows some fluctuation but remains within a consistent range. These patterns collectively reflect a company managing its tax and financing strategies effectively, with fluctuating but resilient operational performance over the analyzed time frame.

The analysis of the quarterly financial indicators over the observed periods reveals several noteworthy trends and fluctuations.

Net Profit Margin

The net profit margin exhibits a general upward trajectory starting from 8.75% in December 2014, peaking at 12.83% in June 2019. Notable increases are observed between early 2015 and late 2015, where the margin rose consistently. A mild decline occurs in the first quarter of 2016, followed by a relatively stable range between roughly 9.84% and 12.66% through to March 2019. Post-peak, the margin slightly decreases but remains strong, settling around 11.79% to 12.04% by March 2020.

Asset Turnover

Asset turnover shows variability with a peak of 1.05 recorded in June 2015, demonstrating efficient utilization of assets during this time. Subsequently, a steady decline is evident through 2016, reaching a low of 0.67 by December 2016. The ratio recovers moderately throughout 2017 and into early 2018, fluctuating between 0.76 and 0.85. From mid-2018 onwards, the ratio stabilizes in the range of 0.83 to 0.9, with a slight downtrend toward 0.83 in March 2020, indicating a modest reduction in asset efficiency near the period end.

Return on Assets (ROA)

ROA trends align somewhat with the net profit margin and asset turnover patterns, initially increasing from 8.88% in December 2014 to a high of 12.27% in September 2015. This is followed by a decline through 2016, bottoming near 7.48% in June and September before climbing again through 2017 and 2018. The rate reaches a second peak of 11.14% in June 2019, then experiences a modest decrease, ending at 9.97% in March 2020. The fluctuations in ROA largely reflect the interplay of profitability and asset efficiency over time.

In summary, profitability measured by net profit margin generally improved over the period, exhibiting resilience despite some dips. Asset turnover experienced more pronounced volatility, with a significant drop in 2016 followed by partial recovery and relative stabilization. Return on assets mirrors these movements, indicating that returns are influenced both by profit margins and how effectively assets are employed. The data suggests an overall positive operational performance tempered by challenges in asset utilization efficiency during certain intervals.

The financial performance over the observed quarters demonstrates several notable trends in key profitability and efficiency ratios.

Tax Burden

The tax burden ratio, which measures the proportion of earnings retained after taxes, shows a general upward trend from 0.62 to 0.81 between mid-2014 and early 2020. This indicates an increasing retention of earnings post-tax, suggesting either a reduction in effective tax rates or improved tax strategies over the period.

Interest Burden

The interest burden ratio remains relatively stable throughout the periods, fluctuating narrowly between 0.91 and 0.95. This stability suggests consistent management of interest expenses relative to earnings, reflecting steady financial leverage and cost of debt.

EBIT Margin

The EBIT margin displays some variability but predominantly stabilizes in the mid-15% to mid-16% range after peaking near 20% in late 2014 and early 2015. This pattern shows an initial increase in operational profitability followed by a plateau, which may point to stabilized operating efficiency or market conditions affecting earnings before interest and taxes.

Asset Turnover

Asset turnover ratios decline from just above 1.0 in late 2013 to about 0.67 by late 2015, indicating a decreasing efficiency in using assets to generate sales. Following this low point, a gradual improvement is noted toward values around 0.87 by early 2020, suggesting a recovery in asset utilization efficiency over the latter part of the period.

Return on Assets (ROA)

ROA trends show initial growth from approximately 8.9% to 12.3% between late 2013 and late 2014, a decline to around 7.5% by late 2016, then a steady recovery peaking near 11.1% in late 2018 before a slight decrease toward 9.97% by early 2020. This reflects fluctuating overall profitability relative to asset base, influenced by variations in both earnings and asset management efficiencies.

In summary, the data indicates improvements in tax retention and stable interest expense management, while operational profitability shows signs of stabilization after a period of growth. Asset utilization encountered a mid-period decline but has been recovering steadily. Overall asset returns reflect these combined dynamics, evidencing periods of strength and softening but generally maintaining positive performance amid varying operational conditions.

The analysis of the financial ratios over the periods ending from December 31, 2013, to March 31, 2020, reveals several key trends and insights related to profitability and expense management.

Tax Burden Ratio

The tax burden ratio, available from December 31, 2014, shows a gradual upward trend. Starting at 0.65 at the end of 2014, the ratio increases steadily over the years, reaching as high as 0.84 by the end of 2018 before slightly stabilizing around 0.80 to 0.81 in the subsequent quarters. This indicates an increasing proportion of income retained after tax obligations, suggesting improved tax efficiency or lower effective tax rates during the later periods.

Interest Burden Ratio

The interest burden ratio remains relatively stable throughout the observed period, fluctuating narrowly between 0.91 and 0.95. This indicates consistent interest expense management relative to earnings before interest and taxes (EBIT). The stability suggests that the company maintained steady debt costs without significant fluctuations impacting earnings.

EBIT Margin (%)

Information on EBIT margin starts from December 31, 2014, showing initial values around 14.38% and then an increase, peaking at 20.21% in the first quarter of 2015. Following this peak, the margin displays some volatility but generally settles in the range of approximately 15.5% to 17.5% thereafter. The period from 2016 onwards shows a relatively stable EBIT margin with mild fluctuations, which may reflect controlled operating expenses and stable operating efficiency.

Net Profit Margin (%)

The net profit margin also begins from December 31, 2014, with a value of 8.75% and demonstrates an upward trajectory through 2015 and beyond. It peaks around 12.83% in the second quarter of 2019, indicating enhanced profitability. Despite some variations, the margin remains mostly above 10% in the latter periods, signifying effective overall cost management and steady bottom-line growth relative to revenue.

Overall, the company exhibits improving profitability metrics over the period analyzed. The increase in tax burden ratio alongside stable interest burdens suggests efficient management of tax and financing costs. EBIT margins experienced an early peak followed by a period of stabilization, while net profit margins demonstrate consistent growth, reflecting enhanced financial performance and operational effectiveness.