Emerson’s second quarter results were met with a negative market reaction, reflecting a shortfall in revenue versus Wall Street expectations. Management attributed the sales miss primarily to easing certain surcharges as tariff exposure lessened late in the quarter, which reduced price contributions and sales growth. CEO Lal Karsanbhai also cited a dynamic tariff environment and unexpected foreign exchange impacts on profits within the Intelligent Devices segment. He emphasized, “Our sales fell short of guidance driven primarily by this dynamic,” while noting that strong aftermarket and modernization activity partially offset weaker legacy discrete demand.
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Emerson Electric (EMR) Q2 CY2025 Highlights:
- Revenue: $4.55 billion vs analyst estimates of $4.59 billion (3.9% year-on-year growth, 0.8% miss)
- Adjusted EPS: $1.52 vs analyst estimates of $1.51 (0.7% beat)
- Adjusted EBITDA: $1.23 billion vs analyst estimates of $1.30 billion (27.1% margin, 4.9% miss)
- Revenue Guidance for Q3 CY2025 is $4.90 billion at the midpoint, roughly in line with what analysts were expecting
- Management slightly raised its full-year Adjusted EPS guidance to $6 at the midpoint
- Operating Margin: 20.3%, up from 19.2% in the same quarter last year
- Market Capitalization: $74.82 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Emerson Electric’s Q2 Earnings Call
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Jeffrey Todd Sprague (Vertical Research Partners) pressed on Intelligent Devices margins and the impact of tariffs and foreign exchange. CEO Lal Karsanbhai explained that FX and tariffs drove margin declines, while core profitability remained stable after adjusting for these effects.
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Charles Stephen Tusa (JPMorgan) asked about order patterns throughout the quarter and the consistency of software growth. COO Ram Krishnan stated that MRO bookings were stable and AspenTech’s ACV growth remains in the high single-digit to double-digit range.
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Andrew Alec Kaplowitz (Citi) sought more detail on process and hybrid market stability and the drivers of growth. CEO Karsanbhai pointed to LNG, power, and life sciences as the main contributors, with specialty chemicals outperforming bulk chemicals due to market dynamics.
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Scott Reed Davis (Melius Research) requested clarification on Ovation orders and their composition. COO Krishnan explained that order growth is a mix of new greenfield projects, modernizations, and aftermarket services, noting that both installation and aftermarket are profitable.
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Nicole Sheree DeBlase (Deutsche Bank) inquired about the rationale for the revised order outlook and margin guidance for the next quarter. COO Krishnan confirmed that tariff-related pricing improvements are expected to support higher margins and that order growth forecasts are based on a mix of segment-specific trends.
Catalysts in Upcoming Quarters
Looking ahead, our analyst team will be closely monitoring (1) the pace of recovery in discrete automation and Test & Measurement, (2) the effectiveness of further tariff management and pricing actions on margins, and (3) continued order momentum in core process and hybrid markets, especially LNG and power. Progress on software integration and new AI-enabled product adoption will also be important markers for Emerson’s ability to sustain growth and profitability.
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