- Shareholder Returns: $10 billion capital return plan (70% of 2026 cumulative cash) via $6 billion share repurchases and $4 billion dividends.
- Q1 Financial Performance: 2% underlying sales growth, 27.7% adjusted EBITDA margin (exceeding guidance), and $1.46 adjusted EPS.
- Backlog Growth: $7.9 billion backlog (+9% YoY) with book-to-bill ratio of 1.13, supporting mid-single-digit 2026 sales growth.
- Margin Guidance: 2026 adjusted EBITDA margin guidance of ~28%, with 2H margins expected to trend toward 28% or higher.
- Regional Strength: North America orders up 18% (driven by power and LNG), with $450 million in project wins and Ovation/T&M orders surging 74%/20%.
Revenue Growth and Margin Analysis
The company's revenue growth was driven by strong customer activity, particularly in the power and LNG sectors, with North America's order number growing 18%. The Ovation business was up 74% and Test and Measurement (T&M) was up 20% in orders. The company's guidance for 2026 includes 5.5% sales growth, 4% underlying sales growth, and an adjusted segment EBITDA margin of approximately 28%. As Ram Krishnan noted, "AI can be complementary to growth for Emerson Electric Co., as its software offerings are built on first principle models and are not disrupted by AI."
Valuation Metrics and Future Expectations
With a P/E Ratio of 36.93 and an EV/EBITDA of 26.0, the market is pricing in a certain level of growth for Emerson Electric Co. Analysts estimate next year's revenue growth at 5.1%. The company's return on equity (ROE) is 11.61%, and its return on invested capital (ROIC) is 4.95%. The dividend yield is 1.41%, indicating a relatively stable return for shareholders. The company's guidance for Q2 2026 adjusted EPS is $1.5 to $1.55, reflecting good performance in Q1.
Regional Performance and Outlook
The company is seeing good activity in the test and measurement space in China, with the semiconductor business up in the high double digits. However, they continue to be concerned about low single-digit negative growth in China by the end of the year. In North America, high single-digit growth is expected to continue, driven by strong customer activity. The company is also watching the situation in Venezuela and is preparing to invest in the country when the time is right.
Tariffs and Margin Impact
The company has built in $130 million of tariffs into the plan but is seeing relief to that number. The Total Energy deal impacts Emerson Electric Co.'s adjusted segment EBITDA margin by approximately 150 basis points. The renewal dynamic reduces adjusted EPS by approximately $0.05 and adjusted segment EBITDA margin by approximately 40 basis points. The company's second half margins are expected to trend towards 28% or more.