Emerson delivered a resilient QQ2 2024 performance characterized by strong process and hybrid demand and a continued portfolio transformation toward software-enabled automation. Management highlighted underlying sales growth of 8% in the quarter, with better backlog conversion and favorable price/mix dynamics contributing to double-digit operating leverage and margin expansion. The company reiterated and elevated its full-year targets, signaling confidence in the secular growth drivers around energy security, sustainability, and digital transformation. In addition, Emerson increased its synergy realization plan with AspenTech to $100 million for 2024, signaling a meaningful step toward improved profitability and cash generation as the portfolio shifts toward higher-margin software-enabled solutions.
On the cash and capital front, Emerson continued to generate robust operating cash flow (OCF) of approximately $743 million in the quarter, with free cash flow (FCF) near $661 million and a path to roughly $2.7 billion of FCF for the year, underpinning its ability to fund buybacks, dividends, and strategic investments. The growth trajectory is anchored by a differentiated technology stack across DeltaV, Ovation, and AspenTech, with DGM and Ovation serving as pivotal catalysts for power and grid modernization as described in the earnings call. Management noted continued cost-out actions and efficiency improvements, accelerating planned synergies to offset slower market recovery in discrete automation and Test & Measurement channels. Investors should monitor how the NATI, T&M, and semiconductor-related exposure evolves into 2025 as those segments transition from weakness to growth.