Emerson Electric Co reported QQ2 2024 results with notable top-line strength but a striking deterioration in gross profitability and operating income, accompanied by solid cash generation. Revenue reached approximately $4.38 billion, up about 16.5% year over year and 6.3% quarter over quarter, signaling healthy demand growth across segments. However, gross profit was negative by about $989 million, driving a negative operating income of roughly $2.29 billion and an operating margin of -52.2%. The company still delivered positive net income of about $501 million and earnings per share of $0.88, aided by non-operating items and depreciation/amortization that contributed to an EBITDA of about $1.17 billion (EBITDA margin ≈ 26.6%). This unusual margin pattern suggests elevated costs, mix effects, or one-time items impacting cost of goods sold, even as non-cash charges and financing elements supported a positive bottom line.
Cash flow remains a strength: operating cash flow was about $743 million, with free cash flow of roughly $661 million. The balance sheet shows a cash position of $2.32 billion and total debt of $11.44 billion, yielding a net debt position of about $9.12 billion. The firm operates with a current ratio of 1.18 and a quick ratio of 0.87, indicating reasonable near-term liquidity but leveraged financial positioning. Intangibles and goodwill are substantial (goodwill ≈ $17.96 billion; intangible assets ≈ $10.98 billion), implying ongoing impairment risk should market conditions deteriorate or if the mix shifts unfavorably. In sum, the QQ2 results reflect a company with structurally healthy cash generation and a potential for earnings leverage if gross margin recovery and operating efficiency are realized, but with notable near-term profitability headwinds and balance sheet leverage to monitor.
Investment implications: The combination of solid FCF, modest dividend yield, and a healthy balance sheet hedge the downside from near-term profitability weakness. Investors should monitor margin stabilization, any corrective pricing/mix actions, and ongoing investments in automation and building technologies that could unlock mid-cycle upside. The current ledger suggests a cautious to positive stance, depending on whether revenue growth can be paired with meaningful margin recovery and deleveraging over the next several quarters.
Key Performance Indicators
Revenue
Increasing
4.38B
QoQ: 6.29% | YoY: 16.51%
Gross Profit
Decreasing
-989.00M
-22.60% margin
QoQ: -151.62% | YoY: -154.91%
Operating Income
Decreasing
-2.29B
QoQ: -1 831.06% | YoY: -435.04%
Net Income
Decreasing
501.00M
QoQ: 252.82% | YoY: -36.74%
EPS
Decreasing
0.88
QoQ: 252.00% | YoY: -36.69%
Revenue Trend
Margin Analysis
Financial Highlights
Revenue and profitability dynamics:
- Revenue: $4.376 billion; YoY growth +16.51%; QoQ growth +6.29% (period: QQ2 2024).
- Gross profit: -$0.989 billion; gross margin -22.60%. This indicates significant gross margin compression versus typical Emerson profitability, suggesting elevated cost of revenue or unusual charges in QQ2 2024. YoY gross profit margin: -154.91%; QoQ: -151.62%.
- Operating income: -$2.285 billion; operating margin -52.22%. YoY operating margin change: -435.04%; QoQ: -1,831.06%.
- EBITDA: $1.166 billion; EBITDA margin ≈ 26.65%, signaling non-cash charges and depreciation/amortization are influencing the bottom line differently than reported operating results.
- Net income: $0.501 billion; net margin 11.45%. YoY net income change: -36.74%; QoQ: +252.82%.
- Earnings per share (EPS): GAAP $0.88; diluted $0.87; weighted-average shares outstanding ≈ 571.4 million (diluted ≈ 574.1 million).
Capital structure and liquidity:
- Cash and cash equivalents: $2.318 billion; total debt: $11.435 billion; net debt ≈ $9.117 billion.
- Current ratio: 1.176; quick ratio: 0.868; cash ratio: 0.302, indicating usable liquidity but a leverage profile that warrants attention.
- Free cash flow (FCF): $661 million; operating cash flow: $743 million; cash flow utilization includes $300 million in dividends and $57 million in share repurchases in QQ2 2024.
Balance sheet intensity and asset quality:
- Total assets: $46.44 billion; goodwill: $17.964 billion; intangible assets: $10.976 billion; total identifiable intangibles/goodwill ≈ $29.94 billion. Leverage is supported by a large asset base but raises impairment risk if market conditions deteriorate or if there is a material shift in end-market demand.
- Total liabilities: $19.659 billion; total stockholders’ equity: $20.9 billion; debt-to-capitalization ≈ 0.354; debt-to-equity ≈ 0.547. Interest coverage: ~11x, signaling adequate ability to service interest costs even under weaker earnings.
Efficiency and valuation:
- Price-to-earnings ≈ 18.6x; price-to-book ≈ 1.78x; price-to-sales ≈ 8.50x; price-to-free-cash-flow ≈ 56.25x. Dividend yield ≈ 0.81%. Enterprise value multiple ≈ 37.80x.
- Operating cash flow yield and capital expenditure coverage metrics show the company supports ongoing investment activity while returning capital to shareholders. Cash flow generation remains a key strength despite near-term profitability challenges.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
4.38B
16.51%
6.29%
Gross Profit
-989.00M
-154.91%
-151.62%
Operating Income
-2.29B
-435.04%
-1 831.06%
Net Income
501.00M
-36.74%
252.82%
EPS
0.88
-36.69%
252.00%
Key Financial Ratios
Gross Profit Margin
Good
52.20%
Gross profit margin is healthy and competitive within industry standards
Operating Profit Margin
Good
22.60%
Operating margin is healthy and competitive within industry standards
Net Profit Margin
Good
11.40%
Net profit margin is healthy and competitive within industry standards
Return on Assets
Weak
1.08%
Return on assets suggests inefficient capital allocation
Return on Equity
Weak
2.40%
Return on equity suggests inefficient capital allocation
Current Ratio
Adequate
1.18
Current ratio meets minimum requirements but limited cushion
Debt to Equity
Moderate
0.55
Debt-to-equity indicates balanced capital structure with manageable debt
P/E Ratio
Fair Value
18.55x
P/E ratio in line with market averages
Price to Book
Fair Value
1.78x
Price-to-book ratio reasonable for profitable companies
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