UPDATE 3-Emerson beats on profit, plans asset sale

Tue Nov 6, 2012 4:05pm EST

* Q4 adjusted profit $1.11/share beats by 6 cents

* Sales up 2 pct to $6.70 bln

* CEO Farr: U.S. fiscal cliff to hit spending

* Shares add 1.9 percent

By Nick Zieminski

Nov 6 (Reuters) - U.S. industrial conglomerate Emerson Electric Co reported a sharply lower quarterly net profit on Tuesday, reflecting a goodwill charge in its network power business, and said it expects earnings to grow by at least a single-digit percentage rate in fiscal 2013.

Slower telecommunications and information technology markets led to the $592 million charge. Emerson said it will pursue a sale of its $1.4 billion embedded computing and power business.

The company is planning for a "challenging" business environment that includes stagnant economies in Europe and likely lower U.S. investment as a result of the "fiscal cliff" of automatic government spending cuts, Chief Executive David Farr said on a conference call with investors.

"Even if they do resolve the fiscal cliff, and I have no idea how they're going to do that, I personally believe the spending in the U.S. will be negatively impacted, both at the government level and at the consumer level," Farr said.

Farr, among the most outspoken U.S. manufacturing executives, said Tuesday's election will result in either "great excitement" or a "great ugh," depending on one's political party. He added that solving the fiscal cliff is the top priority of chief executives after the vote.

"We need the leaders of this country to get together and sort out how we're going to fix the long-term fiscal structure of our government. We can't afford what we're doing right now."

Farr also said Japan was weakening and the outlook for China is uncertain as new leadership takes power there.

While Emerson looks to dispose of a business, its acquisitions are limited to small bolt-on deals, with around $500 million budgeted, he added.

Emerson shares closed up 1.9 percent at $51.46.

BEATING ESTIMATES

Net earnings fell 63 percent to $282 million, or 39 cents per share, in Emerson's fiscal fourth quarter ended Sept. 30, from $761 million, or $1.01 per share, a year earlier.

Excluding the goodwill charge, adjusted profit of $1.11 a share was 6 cents ahead of the average Wall Street target, according to Thomson Reuters I/B/E/S.

Sales rose 2 percent to $6.70 billion, meeting estimates.

St. Louis-based Emerson, which raised its dividend slightly, posted an 18 percent sales increase in its process management business, reflecting investment by the energy industry. Other divisions showed lower or flat sales.

Sales and profit expectations have come down in recent weeks as Emerson's orders have reflected weak telecommunications demand and softening economies in Asia.

Emerson, the maker of factory automation systems, uninterruptible power supplies for data networks, and wireless technology for the energy sector, said orders have slowed because economies remain uncertain in the United States, Europe and China.

It forecast that fiscal 2013 sales would be flat to up 5 percent and earnings per share should grow by the mid- to high-single digits, with up to 80 percent of the increase coming in the first half of the fiscal year.

"If China's economy can get off its back and recent momentum in the U.S. continues, Emerson should deliver another respectable year," Edward Jones analyst Matt Collins said.

In contrast with other diversified U.S. industrial companies, Emerson's full-year forecast calls for a stronger first half of the year. That's partly because the next two quarters' results will benefit from easier comparisons to a year earlier, when Emerson was affected by flooding in Thailand.

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