EMR

We rate EMERSON ELECTRIC CO (EMR) as a Buy with a composite score of 66.0/100 at a current price of $150.89. The stock scores above average across the majority of our six quantitative factors and ranks #245 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (86th percentile) and quality (80th percentile), which together account for the majority of the composite score. All factors score above the 40th percentile, indicating no material weakness in the quantitative profile. We assign a No Moat rating (37/100), High uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

EMERSON ELECTRIC CO holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 66.0/100 places it at rank #245 in our full 7,333-stock universe. With a $73.8B market capitalization, EMERSON ELECTRIC CO operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue contraction of -1% combined with momentum at the 58th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 53% (+10.7pp vs sector) narrow to operating margins of 14% (+12.6pp vs sector) and net margins of 12.7%, yielding a gross-to-net conversion rate of 24%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $150.89, EMERSON ELECTRIC CO appears undervalued relative to its fundamentals. Our value factor score of 86/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 37.7x (a 69% premium to the sector median of 22.3x), EV/EBITDA of 34.4x (at a premium), P/B of 4.1x, P/S of 4.8x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a High uncertainty rating to EMERSON ELECTRIC CO. Key risk factors include significant leverage (107% debt-to-equity). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (107% debt-to-equity). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 76th percentile and quality factor at the 80th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 53% provide a buffer against cost pressures; above-average stability (76th percentile) suggests predictable business dynamics; large-cap scale ($73.8B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate EMERSON ELECTRIC CO's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 10.9%, and the balance sheet is managed within acceptable parameters (D/E: 107%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; EMERSON ELECTRIC CO falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 1.61% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, EMERSON ELECTRIC CO receives a Buy rating with a composite score of 66.0/100 (rank #245 of 7,333). Our quantitative framework assigns a No Moat (37/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 68/100.

Our analysis supports a constructive view on EMERSON ELECTRIC CO. The combination of the current valuation, high uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.