Emerson Electric Co. (NYSE:EMR)

The financial ratios over the six-year period reveal fluctuating leverage and coverage metrics, reflecting variations in the company's capital structure and its ability to cover financial obligations.

Debt to Equity Ratio

This ratio increased from 0.6 in 2014 to a peak of 0.88 in 2016, indicating a growing reliance on debt financing relative to equity during that period. Subsequently, it decreased significantly to 0.53 in 2017 and remained stable through 2018 before rising again to 0.69 in 2019, suggesting a partial shift back towards debt usage.

Debt to Capital Ratio

The ratio followed a similar pattern to Debt to Equity, rising from 0.37 in 2014 to about 0.47 in 2016, then declining to 0.35 in 2017 and 2018, and ending at 0.41 in 2019. This mirrors the changes in the overall capital structure, with a more conservative approach post-2016 before slightly increasing debt levels again.

Debt to Assets Ratio

This ratio rose modestly from 0.25 in 2014 to 0.31 in 2015 and 2016, then declined to 0.24 and 0.23 in 2017 and 2018, respectively, before increasing to 0.28 in 2019. The ratio trends align with other leverage ratios, demonstrating relative stability in asset financing composition with some fluctuations.

Financial Leverage Ratio

Financial leverage increased from 2.39 in 2014 to a high of 2.87 in 2016, reflecting increased total asset usage financed by equity. After 2016, the ratio decreased to around 2.25-2.28 in 2017 and 2018, indicating reduced reliance on debt or improved equity base, before rising to 2.49 in 2019.

Interest Coverage Ratio

Interest coverage showed a sharp increase from 16.36 in 2014 to a peak of 21.81 in 2015, followed by a significant decline to 11.77 in 2016. It gradually improved thereafter, reaching 15.22 by 2019, indicating volatility in operating income relative to interest expenses but a moderate recovery in the later years.

Fixed Charge Coverage Ratio

This ratio rose from 6.32 in 2014 to 8.04 in 2015, then decreased to 5.75 in 2016. It maintained a gradual upward trend thereafter, reaching 6.88 in 2019. The trend suggests varying ability to cover fixed financial charges, with improvement following the low point in 2016.

Overall, the data depicts a company that experienced increased leverage and higher debt reliance through 2016, followed by a period of deleveraging and improved coverage ratios, then signs of moderate increased leverage again in 2019. Coverage ratios indicate some volatility in earnings relative to interest and fixed charges, with improvement after a dip in 2016, reflecting changing earnings or expense dynamics over the period.

Total debt

The total debt exhibited an initial increase from 6,024 million USD in 2014 to a peak of 6,842 million USD in 2015. Following this, a gradual decline occurred, reaching a low of 4,656 million USD in 2017. Subsequently, there was a moderate increase through 2018 and 2019, culminating in 5,721 million USD. Overall, the total debt showed volatility with a downward trend from 2015 to 2017, then rising again towards 2019.

Common stockholders’ equity

Common stockholders’ equity declined significantly from 10,119 million USD in 2014 to 8,081 million USD in 2015 and further decreased to 7,568 million USD in 2016. Thereafter, equity started to recover, increasing to 8,718 million USD in 2017 and continuing to rise slightly to 8,947 million USD in 2018. In 2019, however, equity declined somewhat to 8,233 million USD. The pattern indicates an initial reduction followed by partial recovery before a minor decrease in the final year.

Debt to equity ratio

The debt to equity ratio increased from 0.60 in 2014 to 0.85 in 2015 and slightly to 0.88 in 2016, reflecting rising leverage relative to equity. Then, it decreased markedly to 0.53 in 2017 and held steady at 0.53 in 2018, indicating a substantial reduction in financial leverage. In 2019, the ratio increased again to 0.69, suggesting a moderate increase in leverage relative to equity compared to the two preceding years.

Overall analysis

The data reveal fluctuating leverage dynamics over the period examined. The company experienced higher debt levels and reduced equity in the early years, resulting in an elevated debt to equity ratio. Midway through the period, debt reductions and equity recovery contributed to a lower leverage position. However, in the latter period, a partial rebound in debt and a slight decline in equity led to an increase in the leverage ratio once more. The observed trends could indicate active balance sheet management aimed at optimizing financial stability and cost of capital across these years.

Total Debt

The total debt experienced fluctuations over the six-year period. Starting at 6,024 million USD in 2014, it rose to a peak of 6,842 million USD in 2015 before slightly decreasing to 6,646 million USD in 2016. A significant decline occurred in 2017, dropping to 4,656 million USD. Following this, a moderate increase was observed, with total debt reaching 5,721 million USD by 2019.

Total Capital

Total capital showed a steady downward trend from 2014 to 2017, moving from 16,143 million USD to 13,374 million USD. After 2017, the value stabilized slightly and displayed marginal growth, ending at 13,954 million USD in 2019. This indicates some recovery or stabilization in the overall capitalization post-2017.

Debt to Capital Ratio

The debt-to-capital ratio reflects the proportion of debt within the company’s total capital structure. It increased from 0.37 in 2014 to a high of 0.47 in 2016, suggesting a rising reliance on debt financing during this period. Subsequently, a marked decrease to 0.35 occurred in 2017 and persisted in 2018, indicating a reduction in leverage. However, in 2019, the ratio rose again to 0.41, indicating a moderate increase in debt relative to capital.

Overall Analysis

The data reveals variability in both debt levels and capital structure, with notable reduction in debt and leverage around 2017, followed by moderate increases thereafter. The trends suggest efforts to manage and optimize the balance between debt and capital, potentially in response to market conditions or strategic financial management considerations.

Total Debt

The total debt experienced fluctuations over the observed periods. It increased from 6024 million USD in 2014 to a peak of 6842 million USD in 2015, followed by a slight decrease to 6646 million USD in 2016. A significant reduction occurred in 2017, with total debt dropping to 4656 million USD. Subsequently, it marginally increased to 4760 million USD in 2018 and further rose to 5721 million USD in 2019.

Total Assets

Total assets showed a declining trend from 2014 through 2017, decreasing from 24177 million USD to 19589 million USD. In 2018 there was a minor recovery to 20390 million USD, with values stabilizing somewhat in 2019 at 20497 million USD, indicating a slight rebound after the prior decline.

Debt to Assets Ratio

The debt to assets ratio followed a varied pattern consistent with changes in debt and asset levels. Starting at 0.25 in 2014, it increased to 0.31 in both 2015 and 2016, reflecting higher relative indebtedness during these years. The ratio fell significantly to 0.24 in 2017 and remained low at 0.23 in 2018, correlating with the reduction in total debt and assets. In 2019, the ratio rose again to 0.28, indicating a relative increase in debt compared to assets.

Summary

The data reveal that liabilities and asset values fluctuated over the six-year period without a clear long-term trend in either direction for total debt or total assets. The debt to assets ratio reflects this volatility, with periods of increased leverage during 2015-2016 and a reduction during 2017-2018, followed by a moderate rise in 2019. These shifts may indicate changing financial strategies or external factors influencing capital structure and asset management.

Total assets

The total assets demonstrated a general downward trend over the six-year period. Starting at $24,177 million in 2014, assets decreased each year until 2017, reaching a low of $19,589 million. A modest recovery occurred in 2018 and 2019, with total assets rising to approximately $20,497 million, though not returning to the levels seen at the beginning of the period.

Common stockholders’ equity

Common stockholders' equity showed greater volatility compared to total assets. It declined significantly from $10,119 million in 2014 to a low of $7,568 million in 2016. Subsequently, equity rebounded in 2017 and 2018, increasing to $8,947 million before experiencing another decline to $8,233 million in 2019. Overall, equity remained below the initial 2014 level throughout the later years.

Financial leverage

Financial leverage exhibited notable fluctuations. It increased from 2.39 in 2014 to a peak of 2.87 in 2016, indicating a growing reliance on debt relative to equity during this period. Following this peak, leverage declined sharply to 2.25 in 2017, suggesting a reduction in debt usage or an increase in equity. In the last two years, it edged upwards again, finishing at 2.49 in 2019, reflecting a moderate increase in leverage compared to 2017 and 2018 but still lower than the earlier peak.

The analysis of the financial data over the six-year period reveals distinct trends in operating performance and financial costs related to interest.

Earnings before interest and tax (EBIT)

The EBIT experienced significant fluctuations throughout the period. Initially, there was a notable increase from 3,566 million US dollars in 2014 to a peak of 4,361 million in 2015. However, this was followed by a sharp decline to 2,531 million in 2016. After this drop, EBIT stabilized with a gradual recovery over the subsequent years, reaching 3,060 million in 2019. The overall pattern suggests volatility in operational profitability, with a substantial rebound after the low point in 2016 but without returning to the peak levels observed in 2015.

Interest Expense

The interest expense showed relative stability across the six years, fluctuating only slightly between 200 and 218 million US dollars. This steadiness indicates a consistent cost of debt or financing arrangements without major changes in borrowing levels or interest rates during the analyzed period.

Interest Coverage Ratio

The interest coverage ratio, which measures the company's ability to cover interest costs with its EBIT, reflected the trends in EBIT while smoothing minor variations in interest expense. Starting at 16.36 in 2014, the ratio increased significantly to 21.81 in 2015 due to the rise in EBIT. Subsequently, the ratio dropped sharply to 11.77 in 2016, mirroring EBIT's decline, then showed a steady improvement over the following years, reaching 15.22 in 2019. This indicates an enhanced capacity to meet interest obligations post-2016 but not to the prior peak level.

In summary, the data indicates operational earnings volatility with a substantial peak and trough followed by gradual improvement. Interest expenses remained stable, while interest coverage ratios largely reflected the EBIT trends, suggesting that the firm managed to maintain adequate debt servicing ability despite fluctuations in earnings.

The financial data reveals fluctuations in earnings before fixed charges and taxes over the six-year period. Initially, the earnings increased from 3,977 million US dollars in 2014 to a peak of 4,752 million US dollars in 2015. However, there was a significant decline in 2016, with earnings dropping to 2,804 million US dollars. Following this, the earnings showed a gradual recovery, increasing steadily each year to reach 3,345 million US dollars by 2019.

Fixed charges exhibited a general downward trend during the period. Starting at 629 million US dollars in 2014, fixed charges decreased consistently to 488 million US dollars in 2016. From 2016 onwards, the fixed charges stabilized, fluctuating slightly around the 480–490 million US dollars mark through 2019.

The fixed charge coverage ratio, which measures the ability to cover fixed charges from earnings, showed variability closely aligned with the earnings trends. The ratio improved from 6.32 in 2014 to a peak of 8.04 in 2015, reflecting strong coverage capacity. Following the earnings drop in 2016, the ratio declined to 5.75 but then remained relatively stable, with minor improvements to 6.88 by 2019. This suggests a recovery in the company's capacity to service fixed charges, although not reaching the peak coverage seen in 2015.