Emerson Reports First Quarter 2018 Results and Raises Full-Year Sales and EPS Guidance

Emerson (NYSE: EMR) today announced net sales in the first quarter ended
December 31, 2017 were up 19 percent, with underlying sales up 7 percent
excluding favorable currency of 3 percent and an impact from
acquisitions and divestitures of 9 percent. The first quarter results
reflected continued favorable global economic conditions as both
platforms delivered solid underlying sales growth. Automation Solutions
continued to see broad-based growth led by North America and Asia,
reflecting favorable trends in energy-related, hybrid and general
industrial markets. Growth in Commercial & Residential Solutions was
driven by strong demand in Asia in air conditioning and refrigeration
markets as well as continued growth of professional tools in oil and gas
and construction-related markets.

December trailing three month underlying orders were up 7 percent and
the Company expects orders to trend in a range of 5 to 10 percent for
the remainder of the year.

Pretax margin of 13.2 percent and EBIT margin of 14.2 percent decreased
120 and 160 basis points, respectively, reflecting dilution from the
Valves & Controls acquisition. Excluding Valves & Controls, EBIT margin
of 16.5 percent increased 70 basis points driven primarily by leverage
on higher sales and benefit of prior year restructuring actions.

Earnings per share from continuing operations increased 9 percent to
$0.61, including a $0.03 benefit from the lower enacted U.S. corporate
tax rate under the Tax Cuts and Jobs Act (the “Tax Act”). Earnings per
share were up 18 percent excluding the current year $0.03 tax rate
benefit and a prior year income tax benefit of $0.07. The first quarter
results also included a provisional net tax benefit of $0.07 related to
adoption of the Tax Act, which was offset by a ($0.03) charge for Valves
& Controls first year acquisition accounting and a ($0.04) tax-related
loss from the divestiture of the ClosetMaid business.

“We continued to execute our strategic repositioning plans across both
business platforms and delivered a stronger first quarter than we had
expected a few months ago,” said Chairman and Chief Executive Officer
David N. Farr. “Our growth in the quarter reflects broad-based momentum
across our key end markets and regions, providing solid footing for our
teams to deliver earnings and cash flow growth in 2018. We now see a
stronger year operationally for Emerson, and combined with the benefit
of U.S. tax reform, we are raising our full-year GAAP EPS guidance to
$3.05 to $3.15 and net sales growth to 11 to 13 percent, or 5 to 7
percent on an underlying basis.”

Farr added, “The positive impact of tax reform in the U.S. cannot be
overstated. The legislation levels the global playing field for U.S.
companies and will drive our economy by encouraging capital investment
and ultimately leading to growth of jobs and wages. We expect increased
capital formation to have a favorable impact on Emerson’s growth over
the next few years as U.S. companies bring home cash and invest in U.S.
manufacturing,” he said. “As we see it now, Emerson will increase
capital spending rates as a percent of sales by approximately 0.5
percent over the next five years to approximately 3.5 percent, on
average. We continue to expect 50 to 60 percent of our operating cash
flow will be returned to shareholders, who will benefit from higher
dividend payouts and share repurchases as our cash flow increases. We
also continue to evaluate employee wage and benefit improvements to
ensure that Emerson remains competitive in a growing U.S. economy, and
we plan to implement these changes over the next few months.”

Business Platform Results

Automation Solutions net sales increased 31 percent in the
quarter, with underlying sales up 9 percent excluding favorable currency
of 3 percent and an impact from acquisitions of 19 percent. Growth
continued to be driven by strong MRO demand and small and mid-sized
projects focused on expansion and optimization of existing facilities.
North American underlying sales were up 14 percent driven by continued
favorable trends in energy, life sciences and chemical markets and
investment in Western Canada. Asia underlying sales were up 13 percent
with China up 22 percent supported by continued strong demand in process
and discrete markets. Latin America was up 6 percent reflecting
investments in Mexico, Argentina and Chile. Europe was down 1 percent
and Middle East/Africa was down 7 percent. Margin decreased 160 basis
points to 15.0 percent compared with the prior year. Excluding the
dilutive impact of the Valves & Controls acquisition, margin increased
120 basis points to 17.8 percent, driven by leverage on higher sales and
restructuring benefits.

Commercial & Residential Solutions first quarter net sales
were flat and underlying sales increased 5 percent excluding favorable
currency of 2 percent and an impact from divestitures of 7 percent.
Underlying sales in North America were up 1 percent as steady demand for
professional tools in oil and gas and construction-related markets was
offset by difficult prior year comparisons in residential air
conditioning markets. Asia grew 17 percent, driven by continued
favorable refrigeration and air conditioning demand in China and
elsewhere in the region. Europe and Latin America were up 1 percent and
Middle East/Africa was up 4 percent. Margin increased 20 basis points to
20.1 percent compared with the prior year.

2018 Outlook

We are increasing our full-year sales and earnings per share guidance
based on stronger operational performance, increased share repurchases
and the favorable impact of the Tax Act.

Total Emerson net sales are now expected to be up 11 to 13 percent with
underlying sales up 5 to 7 percent excluding a 6 percent impact from
acquisitions, divestitures and currency translation. Prior guidance was
net sales up 8 to 10 percent and underlying sales up 4 to 6 percent.
Automation Solutions guidance is increased to 18 to 20 percent net sales
growth with underlying sales up 6 to 8 percent. Commercial & Residential
Solutions guidance is increased to 1 to 3 percent net sales growth with
underlying sales up 4 to 6 percent.

We are increasing our GAAP earnings per share guidance to $3.05 to $3.15
from prior guidance of $2.66 to $2.86. Previously, we also provided
adjusted earnings per share guidance of $2.75 to $2.95 which excluded
($0.09) of total estimated charges related to Valves & Controls first
year acquisition accounting and a tax-related loss from the divestiture
of the ClosetMaid business. Actual results for these two charges totaled
($0.07) in the quarter, which were offset by the net tax benefit related
to adoption of the Tax Act. Therefore, we are providing updated earnings
per share guidance on a GAAP basis only.

The following table bridges prior adjusted earnings per share guidance
to new GAAP guidance.

Expected GAAP earnings per share guidance of $3.05 to $3.15 reflects
increases for improved operational performance and increased share
repurchases, the estimated impact of the lower U.S. corporate tax rate
and items related to adoption of the Tax Act. These adoption-related
items include the revaluation of net deferred income tax liabilities to
the lower U.S. corporate tax rate and taxes on repatriation of foreign
earnings.

The Tax Act reduces our tax rate and consistent with our updated
guidance, we currently expect the 2018 consolidated tax rate to be
approximately 25 to 27 percent. In 2019 and thereafter, the tax rate is
expected to be approximately 25 percent.

Upcoming Investor Events

Today, beginning at 2:00 p.m. Eastern Time, Emerson management will
discuss the first quarter results during an investor conference call.
Access to a live webcast of the discussion will be available at www.emerson.com/financial
at the time of the call. A replay of the conference call will remain
available for 90 days.

On Thursday, February 15, 2018, Emerson will host its annual investor
conference in New York, NY. The conference will begin Thursday morning
with Company presentations from 8:30 a.m. ET to approximately 1:00 p.m.
ET. Access to a live webcast of the presentations will be available at www.emerson.com/financial
at the time of the event. A replay of the conference will remain
available for approximately three months.

Forward-Looking and Cautionary Statements

Given the complexities associated with the Tax Act, the ultimate effects
on repatriation cost and other tax items may differ materially from the
provisional amounts presented herein due to additional regulatory
guidance that may be issued and further evaluation of the Company’s
actions, assumptions and interpretations.

Statements in this press release that are not strictly historical may be
“forward-looking” statements, which involve risks and uncertainties, and
Emerson undertakes no obligation to update any such statements to
reflect later developments. These risks and uncertainties include
economic and currency conditions, market demand, pricing, protection of
intellectual property, and competitive and technological factors, among
others, as set forth in the Company’s most recent Annual Report on Form
10-K and subsequent reports filed with the SEC, as well as the impact of
the Tax Act as described above.

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