Emerson had a successful year in 2023, with the management team focusing on their value creation strategy. They made progress in improving their culture, including implementing an employee value proposition, promoting diversity and inclusion, and addressing sustainability. The team also launched a new talent program.

In the second paragraph, the speaker discusses the completion of their portfolio transformation, which has resulted in a more focused and diversified portfolio aligned with key macro drivers. They also mention the successful execution of their management system, leading to strong financial results and growth in orders and backlog. Additionally, they highlight their commitment to innovation, cost management, and delivering on their commitments related to the Copeland transaction.

The speaker expresses gratitude to customers and employees for their trust and hard work. They then discuss the exceptional performance of the company in 2023, with double-digit sales growth and increased operating leverage. They also mention their expectations for 2024, including continued sales growth and the early benefits of a recent transaction. The company plans to focus on growth platforms and leverage their technology and expertise to capture investments in various markets. Despite challenges in discrete markets, the company expects a strong year overall.

Emerson's performance in 2023 was exceptional, with a 5% increase in orders and double-digit growth in underlying sales. This demonstrates the company's portfolio relevance and leadership position in various markets. All world areas and business groups saw growth, and the company's operating leverage was 53%. Adjusted EPS and free cash flow also exceeded expectations. This is a testament to the power of the Emerson management system and its ability to create value for shareholders. The company's focus on execution and leveraging its installed base has led to market share expansion and long-term success.

Emerson's investment in digital technology and software has resulted in a 470 basis point expansion in gross margins, with strong price discipline and differentiated technology contributing positively. The acquisition of NI will further expand gross margins and drive operational leverage. Emerson also recently hosted a successful event showcasing their control systems and software technology, highlighting their integration with AspenTech and discussing their boundless automation vision. This event not only helps customers understand current products, but also provides important inputs for future innovation.

The company's vision is to empower customers to access and utilize their operational data for better decision-making and to balance their production and sustainability goals. They are accelerating innovation in four priority domains, including disruptive measurement technologies and self-optimizing asset software. The recent DeltaV Version 15 Feature Pack 1 rollout includes enhancements to software and the introduction of a subscription controller and edge solution. The company is also making investments in intelligent devices and sustainability solutions. The acquisition of NI will result in a new test and measurement segment in 2024.

The company is pleased with the progress made in the first month with NI and is committed to achieving $165 million in synergies by the end of year five. They will continue to pursue bolt-on acquisitions in four segments, including industrial software, test and measurement, factory automation, and smart grid solutions. They recently completed two acquisitions in the fourth quarter, including Flexim and Afag. The company's portfolio transformation is now largely complete, with a focus on cohesiveness and diversification in the discrete industry.

Emerson's growth is driven by energy security, sustainability, and digital transformation, leading to a more stable business profile. They have completed $36 billion worth of transactions, disposing of low-growth assets and acquiring high-growth businesses. Their strategic funnel is now over $10 billion, with two-thirds in growth platforms. In the fourth quarter, they were awarded over $500 million in project content, with a focus on LNG, carbon capture, hydrogen, life sciences, and metals and mining. They have also made progress in diversifying into hybrid and energy transition markets, with three strategic projects in 2023. These include automating five plants for Samsung Biologics and potentially using AspenTech software for future expansion.

In the fourth quarter, Emerson's financial results were in line with expectations, with underlying sales growth at 5% and price contributing 4 points of growth. Backlog declined by $300 million from the previous quarter but was still up 12% compared to the beginning of 2023.

In the fourth quarter of the fiscal year, Emerson's software and control sales grew by 2%, including the impact of AspenTech's ownership. The control systems and software business met expectations, while AspenTech's sales were lower due to renewal timing and accounting factors. Intelligent devices also saw growth, while the discrete automation business was down due to weak demand in Europe and China. Emerson's adjusted segment EBITDA margin improved and free cash flow increased. Overall, the fiscal year was exceptional for Emerson with strong sales growth and margin improvement.

In summary, the company's free cash flow increased by 35% and their free cash flow conversion was 88%. Adjusted EPS grew by 22%, with operational performance being a major driver. The company expects another good year of financial performance in 2024, with resilient end markets and a strong backlog and funnel. Process and hybrid end markets are expected to remain strong due to various secular trends.

In 2024, we expect process and hybrid sales growth to be in the mid to high single-digits, driven by investments in energy transition markets and nearshoring in the US and around the world. Discrete markets are in a different part of the cycle, but we expect them to turn positive in the second half of 2024. Our 2024 guidance includes underlying sales growth of 4% to 6%, with intelligent devices and software and control within this range. Test and measurement is excluded and is expected to add $1.6 billion in sales. We will continue to drive differentiated incremental margins and expect operating leverage in the mid to high 40s.

The company expects price/cost to continue to be margin accretive in 2024, with ongoing productivity and cost savings driving further benefits. Adjusted EPS is expected to increase by 18% at the midpoint, with contributions from NI and AspenTech. Net interest expense is expected to be $105 million and free cash flow is expected to be $2.6 billion to $2.7 billion. For the first quarter, underlying sales are expected to increase 6.5% to 8.5% with leverage in the mid-30s. Adjusted EPS is expected to increase by 31% at the midpoint, with a contribution from NI. The company ended 2023 with free cash flow of $2.4 billion and expects to have a free cash flow margin of 16.8% or $2.9 billion in 2024, despite two headwinds of approximately $200 million in acquisition-related cash payments.

The speaker discusses the company's expectations for an increase in CapEx spend and free cash flow in 2024. They also mention their commitment to disciplined capital allocation, with a focus on internal development and organic growth investments. The company plans to increase R&D spend in four priority breakthrough domains and will also continue to pay dividends and pursue strategic acquisitions. They anticipate approximately $500 million in share repurchases in 2024. The speaker expresses their excitement and confidence for the upcoming fiscal year.

The speaker asks for more information about the company's fourth quarter orders and how much of the synergy target will be achieved in the first year. The speaker also asks about the organic growth guide for 2024 and the assumptions for price and working capital in the cash guidance.

The speaker discusses the company's $250 million in one-time expenses related to acquisitions and higher capital expenditures. They also mention that working capital is expected to improve in 2024 and orders and backlog are expected to remain stable. The speaker then addresses the operating leverage on Slide 15, stating that it will increase after Q1 despite a decrease in organic sales growth. They mention potential factors such as mix and subsegments, and suggest that organic sales growth may continue to decelerate throughout the year.

Mike Baughman and Julian Mitchell discuss the mix of discrete automation softness and increased spending on growth platforms and innovation in the first quarter. Baughman explains that the first quarter leverage is affected by a year-over-year comparable and restructuring in the discrete business. Mitchell asks about the potential impact of the softness in discrete on process cycles, but Lal Karsanbhai explains that unusual secular trends in near-shoring, energy affordability and security, and sustainability are driving continued investment in process automation.

The speaker is discussing the expected performance of National Instruments in the upcoming years. They mention that the company's process and hybrid industries have been performing well and are expected to continue to do so due to disciplined capital spending and investments in sustainability. The speaker also addresses concerns about National Instruments' 4Q fiscal sales, which were down by high single-digits, and predicts that orders will remain down for the first half of the year before turning positive in the second half. They also mention that sales are expected to be down for the first three quarters before turning positive in the fourth quarter.

In this paragraph, an analyst named Nigel Coe asks a question about the backlog and potential FX revaluation impacts. The CEO, Lal Karsanbhai, clarifies the organic movement and discusses the company's performance in China. Another analyst, Scott Davis, asks for an update on China and Lal Karsanbhai responds, mentioning investments and sales in the country. A third analyst, Joe O’Dea, thanks the team for taking his questions.

The speaker is discussing the expected earnings contribution for the year from NI, stating that it will be around $0.05 in the first quarter and $0.10 for the rest of the year. They also mention a volume expansion in the second half of the year that will drive profits. The R&D budget is increasing to 7% and will continue to increase as the company acquires new businesses. The investment is focused on disruptive measurement, automation, and asset performance management.

Christopher Glynn from Oppenheimer asks about funnel conversion comments and trend lines for further acceleration and how much of that is factored into fiscal '24 guidance. Lal Karsanbhai responds that the funnel is expanding organically and growing in the right areas, with energy security and transition being a big part of it. The wins are also aligned with the growth platforms, particularly in energy transition. Ram Krishnan adds that they are not seeing any impacts from channel destocking.

The discrete slowness in the market is affecting European machine builders and the overall factory automation segment in North America. However, the company is holding its own in terms of order rate decline compared to its peers. The company expects to see positive orders in the second half of 2024. The company's performance in terms of its longer term algorithm of 35% may be conservative, as it has been operating in the mid-50s over the past few years. There are tailwinds in terms of cost and supply chain benefits that will contribute to the company's performance. The company is in a different world in terms of supply chain, with better logistics and material flow, but still faces spot shortages. The company's gross margins for 2023 are at 49%.

The company is expected to expand further in 2024, with a focus on higher leverage and incremental for the business. The guidance for the year is in the mid to high 40s, and the company plans to reassess their financial plan as the year goes on. They also plan to retire the KOB 1, 2, 3 names, but expect MRO to remain around 60% in 2024. There is a focus on the $100 million corporate platform cost takeout and the $150 billion install base for MRO. The company feels confident in their understanding of the install base and has programs in place to keep the product evergreen. A question was asked about the KOB3 side, and the company expects it to hold up at around 65% and to be the most pricing elastic portion of their business.

In this paragraph, the speaker discusses the weakness in the company's business and how it has been affected by global market conditions. They also mention that the comparables will get easier in the second half of the fiscal year, but they are not counting on underlying demand conditions to significantly improve. The speaker also addresses the company's outlook for the first quarter and full year, noting some deceleration due to caution around the discrete cycle. The conference then concludes.

This summary was generated with AI and may contain some inaccuracies.