QS Research · Michael Burry's Scion Capital analyst template · 2006
EMERSON ELECTRIC CO (EMR)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $167.54 (close 2026-11-10)
Conclusion: PASS
Conviction low · base case +6% · downside -19% · upside +15%
Emerson is a better business than its pre-deal filings show: FY Sep 2026 post-deal revenue of $18.98B, GAAP EBITDA of $5.30B and FCF of $3.54B, with $9.60B of backlog and Q4 FY2026 underlying orders +14%. But the stock at $167.54 already pays 34.2x earnings and 19.3x EV/EBITDA for a company earning a 9.3% ROIC against a 10.3% WACC, a -1.0 pt economic-profit spread, and the peer-median P/E of 28.3x (8 peers in the comps table) puts the base case at $176.92, +5.6%. The FY2027 guide of ~$7.25 adjusted EPS and $3.8-3.9B FCF is real and dated, but it is already in the price; the upside is +15.0% to $192.67, and the downside, when earnings disappoint and the multiple falls to 27.1x, is -18.7% to $136.27. That is a reward/risk of 0.8 for a low-conviction pass: a high-quality automation portfolio, but not a deep-value long and not a short at 1.8% short interest.
Key numbers
- Share price: $167.54
- Market cap: $91.91B
- Latest financial period: FY Sep 2026 to Sep 30, 2026
- Revenue (FY Sep 2026): $18.98B
- EV / EBITDA (FY Sep 2026): 19.3x
- P/E (FY Sep 2026): 34.2x
- FCF yield: 3.8%
- Price / book: 4.43x
- Earnings-quality flags (FY Sep 2026): none flagged
- EV / FCF (FY Sep 2026): 28.9x
- Revenue growth (latest fiscal year): +5.4%
- ROIC (FY Sep 2026): 9.3%
- WACC: 10.3%
- Economic profit spread: -1.0 pts
The 15 boxes
- ✓ 1. Long-form business notes
Emerson is no longer the FY2020 company in these filings: the FY2020 10-K shows three segments (Automation Solutions, Climate Technologies, Tools & Home Products) with 79% of sales in Automation-type end markets and Climate/Residential at 15% residential, while the FY2026 10-K shows five segments in three business groups built by two large deals — NI ($8.2B equity value, closed 2023-10-11) and the AspenTech buy-in (~$7.2B, closed 2025-03-12) — after exiting most of Climate Technologies to Blackstone. Revenue in the XBRL set rose from $12.93B (FY2021) to $18.98B (FY2026) with pre-tax income $1.76B to $3.49B, but the deal periods are not comparable to the pre-deal ones and FY2023 net income of $13.22B against $2.90B pre-tax is a one-off, not operating earnings. The current company is a direct-sales automation portfolio (~70,000 employees, 8.3% of sales on R&D in 2026) carrying $9.59B of backlog at 2026-09-30.
- ✓ 2. Competitive advantage
The sources support a scale-and-brand position in served niches, not a measurable moat: management claims a "market leadership position in many of its product lines" and states no single company competes with Emerson across all of them, but names no competitor and gives no share data. The numbers show durable gross economics (gross margin 53.4% in FY2026, 58.5% in FY2021) and light capital needs (capex $443M on $18.98B FY2026 revenue against $3.98B operating cash flow), while the pre-tax margin swing from 19.1% (FY2023) to 11.6% (FY2024) tracks acquisition amortization ($764M to $1.37B), not a collapse in pricing. FY2021-FY2023 belong to a smaller, pre-National-Instruments/pre-AspenTech company, so the margin path should not be read as one continuous trend. The risk factors frame the exposure as competitive pressure on price and share, distributor dependence, and rivals moving faster on AI.
- ✓ 3. 10-Q takeaways
Q3 fiscal 2026 (quarter ended 2026-06-30) net sales were $4,873M, up 7% reported and 6% underlying on 3% volume and 3% price, with pretax margin 18.8% vs 16.1%; but gross margin of 54.5% (+1.9 pts) was lifted by $82M of IEEPA tariff refunds booked in cost of sales in the quarter, a one-off excluded from adjusted EBITA, which rose 10% to $1,303M (26.7% of sales). Nine-month sales were $13,781M (+5%), adjusted diluted EPS $4.71 vs $4.38, operating cash flow $2,902M and free cash flow $2,618M, with inventory building to $2,513M from $2,213M at September 30, 2025. FY2026 guidance was raised to ~5% sales growth, ~$6.55 adjusted EPS, ~$4.1B operating cash flow and ~$3.6B free cash flow, alongside ~$1.0B of assumed buybacks and ~$1.2B of dividends.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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