UPDATE 3-Emerson says 2015 sales $32 bln-$35 bln possible

* Sees organic sales growth 7-8 percent a year

* "We are entering a sweet spot" - CEO

* Inflation a bigger worry than labor costs

* Analyst: New services can offset commodity 'tsunami'

* Shares down slightly

(Adds analyst comments, byline, updates stock)

By Nick Zieminski

NEW YORK, Feb 4 (Reuters) - Emerson Electric Co (EMR.N) could take in as much as $35 billion in annual sales by 2015 because of an expected rebound in capital investments as the conglomerate enters a "sweet spot" in the economic recovery.

St. Louis-based Emerson, a maker of systems to boost factory efficiency, uninterruptible power systems and technology used by oil and gas companies, told analysts it expects underlying sales to grow 7 to 8 percent a year between 2011 and 2015, while acquisitions could add as much as $5 billion to its sales.

Emerson's 2010 revenue was $21 billion, and the company said it could reach $32 billion to $35 billion in 2015.

"We are entering a sweet spot. We've had two tough years, (and) are coming off a low base," Chief Executive Officer David Farr said. "People are starting to invest. The underlying global economies are just in the early stages of improving. The winds will stay to our back for the next two or three years."

In recent years, Emerson has pushed into quickly growing areas such as energy efficiency, which could generate $7 billion in sales compared with $2 billion now.

The company gets more sales from emerging markets than many peers -- 34 percent of its total. Its China sales totaled $2.7 billion last year. Another $1.6 billion came from other Asian countries. More than a billion came from Latin America.

Gross fixed investment may rise by double digits in China in 2011 and by up to 9 percent in India and Latin America, Emerson estimates. Fixed investment in emerging markets last year of $6.5 trillion compared to mature markets' $6.7 trillion.

HIGHER CAPEX, BUT SOARING COSTS

Emerson -- whose customers include BP Plc (BP.L), Caterpillar Inc (CAT.N), Chevron Corp (CVX.N), Cisco Systems Inc (CSCO.O) and Ericsson (ERICb.ST) -- said its customers' capital spending could reach $65 billion this year after two leaner years. It estimates international sales will account for 65 percent of its total by 2015, with Asia generating $10 billion in sales a year later.

"Gross fixed investment is definitely going to be above average over the next three years and a lot of that will have to do with investments to get more stuff out of the ground," said Sterne Agee analyst Nick Heymann. "The outlook for sales is at strong as it's been, certainly since the middle of the decade."

Heymann added that industrial companies are facing a "tsunami" of raw materials cost increases and companies like Emerson that sell to equipment manufacturers and to distributors might not be able to fully pass on their higher costs.

But Emerson could be able to offset those costs with sales of new services it is developing. One idea highlighted at Friday's analyst meeting involves using data from Emerson systems to sell new diagnostic and connectivity services that could improve productivity and cut energy use, potentially a $1 billion boost to revenue within 5 years.

"It could allow the company to more than offset any margin pressures from raw materials," Heymann said. "I'd say this is where you're going to find your margin steroids."

Emerson peers include General Electric Co (GE.N), Honeywell International Inc (HON.N), Schneider Electric SA (SCHN.PA) and Siemens AG (SIEGn.DE).

'INFLATION IS HAPPENING'

Inflation is not getting enough attention from policy-makers, CEO Farr said.

"Inflation is happening," he said. "The only people that don't understand that are sitting in Washington."

Rising material costs are a bigger concern for a manufacturing company than labor, since Emerson spends three times more on materials than salaries. Since the third quarter of 2009, prices for copper are up 85 percent, steel up 68 percent and aluminum and crude oil each up more than 40 percent, according to a company presentation.

"The old issues in Washington and Europe are all around labor. Those days are gone. It's about capital, and capital is getting expensive," Farr said.

Emerson shares were down 21 cents at $60.03 in midday trading on the New York Stock Exchange. (Reporting by Nick Zieminski. Editing by Gerald E. McCormick and Robert MacMillan)