Consider Buying Emerson Electric (EMR) on the Dip

Emerson Electric (NYSE:EMR) stock price declined almost 4.25% in the last one month alone, after hitting a 52-weeks high of $64 a share last month. Despite the latest selloff, EMR’s stock price increased nearly 8% in the last three months, extending the surge to 17% in the last twelve months. The latest selloff in Emerson’s share price was driven by the volatility in energy markets and the downturn in oil prices.

However, the dip in EMR shares offers a perfect buying opportunity for the long-term investors considering its solid dividends and the potential growth in earnings. After depressed performances in the last couple of years, EMR asset sales, restructuring initiatives and investments in growth opportunities are likely to generate higher profits for the company and its shareholders.

Recently, UBS has upgraded Emerson to Neutral from Sell and increased their price target to $64 from $51, supported by improved order trends and margin execution. The company’s future fundamentals are improving, as demand for its products has been gradually rising and the company’s recent acquisition will add significant growth to its revenues.

At the end of last month, its trailing three-month orders increased 2% and underlying orders were up 1%. In the latest quarter, its earnings per share from continuing operations increased almost 22% to $0.56 per share, compared with the same period last year.

Its CEO said. “The benefits from our restructuring actions during the past two years played a critical role in our ability to deliver higher margins across many of our businesses.”

Following stronger than expected results in the first quarter of fiscal 2017, EMR increased their full-year earnings per share guidance by $0.12 to $2.47-$2.62. Emerson’s investments in growth opportunities, including the acquisition of Pentair’s valves and controls business, will allow it to generate higher profits in the coming years. Therefore, the dip in EMR’s stock is a buying opportunity.

The author of this article holds no position in any of the stocks mentioned above.

Alexander is an analyst for who specializes in index and commodity trading. His outlook is usually near-term to medium-term. He has over 10 years of experience in the financial industry and began his career at the dealing desk. Alexander holds a Bachelor’s degree in Economics from University of Delaware.