Emerson profit lifted by process management

Tue Aug 7, 2012 3:11pm EDT

(Reuters) - Emerson Electric Co (EMR.N) reported a higher quarterly profit on Tuesday, lifted by improved results in the process management business, but the industrial conglomerate trimmed its full-year earnings forecast because of slowing economies around the world.

Shares of Emerson rose, however, since the forecast was above analyst estimates.

The stronger dollar will be a bigger headwind in the current quarter than in the third, Chief Executive David Farr said on a conference call. Europe is likely to see falling investment next year and China's economy will likely continue to struggle.

Worries about the U.S. fiscal position -- a so-called fiscal cliff could force budget cuts in the new year -- are curtailing investment by corporations, Farr said.

"The uncertainty of what's going to go on relative to the U.S. fiscal policy is a big issue, it's a huge issue. People are only going to spend what they need to spend and people are cutting back."

Emerson, a provider of wireless networks used in oil and gas production and uninterruptible power supplies, said net earnings rose 13 percent to $770 million, or $1.04 per share, in the fiscal third quarter that ended June 30, from $683 million, or 90 cents per share, a year earlier.

Results topped average analyst estimates by 4 cents, according to Thomson Reuters I/B/E/S.

Sales rose 3 percent to $6.48 billion, which was below Wall Street estimates of $6.61 billion.

Emerson's process management segment posted a 19 percent increase in revenue, lifted by demand for energy infrastructure. Earnings jumped by one-third in that business, which makes control systems and software to run plants in process industries such as energy, food and beverage and water treatment.

The profit gains reflected higher sales and recent cost cuts, and Emerson said the unit's outlook was favorable for the next several quarters.

The St. Louis-based company, which also makes industrial automation systems and heating and cooling technology, said global economies were slowing and business investment was expected to remain "tepid."

It cut its full-year earnings forecast to a range of $3.35 to $3.40 a share, compared with a May forecast of $3.35 to $3.50.

Analyst estimates, which have come down in recent weeks, average $3.34 a share.

"Clearly the global economy has downshifted, but the companies that prepared for it are weathering the storm pretty well," said analyst Matt Collins of Edward Jones, which has a "buy" rating on Emerson shares.

Shares were up 2.5 percent at $50.16 on Tuesday afternoon on the New York Stock Exchange. They are back at the same level as in early May, before Emerson's previous earnings report disappointed investors.

(Reporting by Nick Zieminski in New York; editing by John Wallace, Maureen Bavdek and Matthew Lewis)

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