Emerson Electric stock price soared to record: is it a good buy?

Emerson Electric (NYSE: EMR) stock price has joined other popular industrial companies like GE, Caterpillar, and Illinois Tool Works that have surged to a record high. It surged to a high of $111 on Monday, a 35% increase in the past 12 months. It has soared by over 14% this year, outperforming the Nasdaq 100 and S&P 500 indices.

Emerson Electric is one of the biggest industrial companies in the United States. The company operates in two key segments: intelligence devices and software and control. Its intelligent devices include divisions like final control, measurement, discrete automation, and safety and productivity.

Emerson Electric, which has been around for 133 years, makes products that are significantly hard to replicate. These products include actuators, valves, electrical and lighting, and regulators, among others.

The company has grown rapidly over the years. Most of this growth has been organic while others has been through acquisitions. For example, it acquired National Instruments in 2023 in a deal valued at over $8.2 billion.

Emerson Electric has also been selling some of its businesses. It sold a stake in its Climate Technologies business to Blackstone for $14 billion and InSinkErator to Whirlpool in a $3 billion deal.

Like other companies of its size, Emerson Electric’s business is not growing as fast. Its annual revenue jumped to $15.6 billion in 2023 from $13.8 billion in the previous year. It made $13.5 billion in 2019.

Its profit has also been rising, helped by cost cuts that the management has implemented. Its pre-tax earnings rose from $1.8 billion in 2019 to over $$2.7 billion, which explains why the stock has been growing.

Analysts expect that Emerson Electric’s revenues will continue doing well. They expect that its revenue for 2024 and 2025 will be $17.5 billion and $18.50 billion, respectively. Its EPS is expected to be $5.39 and $5.86, respectively.

A case for Emerson Electric stock price can be made. It is a leading player in the automation industry, which is expected to grow in the next few years. 

The company has a strong balance sheet and a long track record of reducing its outstanding shares through buybacks. It has reduced the number of outstanding shares from 643 million in 2015 to 571 million. It is repurchasing stock worth about $500 million this quarter. 

It also makes products that are hard to manufacture and disrupt. This gives it a moat in some of the biggest industries globally.

EMR chart by TradingView

The weekly chart shows that the EMR stock price has been in a strong bull run in the past few months. It recently jumped above the crucial resistance at $100, the upper side of the ascending triangle pattern.

The stock is above the supertrend indicator and all moving averages. Further, the Relative Strength Index (RSI) and the Stochastic Oscillators have all pointed upwards. Therefore, the outlook for the Emerson Electric stock price is still bullish, with the next level to watch being at $120.

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