Emerson Electric Co. (NYSE:EMR) Q4 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 02:30 pm ET


Emerson Electric Co. (NYSE:EMR) Q4 2019 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen, thank you for standing by. Welcome to Emerson's Investor Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] This conference call is being recorded today, November 5, 2019. Emerson's commentary and responses to your questions may contain forward-looking statements including the Company's outlook for the remainder of the year. Information on factors that could cause actual results to vary materially from those discussed today is available at Emerson's most recent Annual Report on Form 10-K as filed with the SEC. I would now like to turn the conference over to Mr. Tim Reeves, Director of Investor Relations at Emerson. Mr. Reeves the floor is yours, sir.

Timothy Reeves

Okay. Thank you, Mike. I'm joined today by David Farr, Chairman and Chief Executive Officer; Frank Dellaquila, Senior Executive Vice President and Chief Financial Officer, Lal Karsanbhai, Executive President Automation Solutions; Bob Sharp, Executive President, Commercial and Residential Solutions and introducing Pete Lilly, the incoming and upgraded Director of Investor Relations, who will surely not mispronounce Frank's name.

Welcome to Emerson's Fourth Quarter 2019 Earnings Conference Call. Please follow along in the Slide presentation, which is available on our website. I'll start on Slide 3 with the full-year performance report card. 2019 required our organization to be nimble and responsive to a lower growth environment than we had expected a year ago and we did respond. On our second quarter earnings conference call, we began talking about additional restructuring actions and we did so again on our Q3 call in August. In total, we executed $35 million of additional actions in the second half and on October 1st, we announced our Board's review of further actions appropriate for the lower growth environment we see over the next couple of years.

Underlying sales finished the year up 3% versus our initial guide of 4% to 7%. We saw slower than expected growth across both platforms, Automation Solutions grew 5%, which was mostly driven by efforts targeting our broad installed base. We saw large capital projects start to push out in Q2 and that trend continued through the second half. Commercial and Residential Solutions saw a sharp decline in Asia in the first quarter and was a headwind to growth all year.

Cooler weather hampered residential growth in North America and professional tools and cold chain markets began to slow through the second half as non-residential investment slowed. Despite slower growth, we delivered just above our EPS guidance helped by lower tax rate and lower corporate costs. Importantly, we had a strong cash flow for full year, delivering free cash flow at $2.4 billion, which was up 6% and reflected 105% free cash flow conversion. This drove dividends as a percent of free cash flow down to 50% a critical milestone.

In 2019, we completed our 63rd year consecutive dividend increases and returned $2.5 billion to investors including $1.25 billion of share repurchases, which was