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.