The operator introduces the Emerson First Quarter 2024 Earnings Conference Call, and Colleen Mettler, Vice President of Investor Relations at Emerson, welcomes participants. The presentation may include forward-looking statements and non-GAAP measures. CEO Lal Karsanbhai thanks the Emerson team, Board of Directors, and customers for their support. The first quarter results demonstrate the strength of the markets, technology, and execution of the global teams. The demand environment remains healthy for process and hybrid markets.

Despite challenges such as higher interest rates and geopolitical issues, projects in various industries are moving forward at a healthy pace. This, along with strong execution and a focused growth approach, has led to a positive Q1 performance. The company's portfolio transformation is complete and no major transactions are expected in 2024. The test and measurement business had a strong first quarter and is expected to meet full year expectations. Q1 orders grew by 4%.

The third paragraph of the article discusses the strong performance of processing hybrid markets and the decline in discrete orders as expected. The company saw growth in the LNG and life sciences industries, with project wins in various regions. The company expects low single digit order growth in the first half of 2024 and mid-single digit growth for the full year. Sales grew 10% in the quarter, driven by process and hybrid markets. Energy transition and metals and mining were bright spots, resulting in strong operational execution and 41% operating leverage. Adjusted EPS and free cash flow also saw significant increases. The company's strategic project funnel grew to $10.4 billion, with growth programs representing two-thirds of the funnel. Emerson was awarded $400 million in project content in the first quarter, with a focus on energy transition.

Emerson has been selected by DG Fuels in Louisiana to provide automation solutions for the production of sustainable aviation fuels. They have also been chosen by SungEel HiTech to automate a lithium ion recycling process and by a large scale LNG liquefaction facility in the Middle East. These selections demonstrate Emerson's strong presence and expertise in energy transition markets. Emerson remains focused on accelerating innovation for profitable growth.

Emerson has been recognized as the 2024 Industrial IoT Company of the Year by IoT Breakthrough for its recent innovations and technology leadership. These innovations include the Ovation green portfolio, Florida cloud solutions, one-click transfer software, and the DeltaV edge environment, all of which support the boundless automation vision. These innovations will be showcased at the upcoming Users Exchange in Dusseldorf, Germany, which will also feature industry-specific exhibits for emerging and growth markets. On Slide 7, an update on synergy progress in test and measurement will be provided.

In the first quarter, Emerson effectively used the time between signing and closing to plan integration and synergy activities for its test and measurement business. This was done using a world-class M&A methodology and the company's Emerson Management System. The strong team collaboration in the current market environment has allowed for accelerated synergy activities, including addressing public company and corporate costs and implementing sales and marketing and research and development transformations. The company is also leveraging its management system and best practices to improve operational execution and commercial excellence at test and measurement. As a result, the cost synergy target has been increased to $185 million, which is expected to be achieved by the end of 2026, two years earlier than originally expected. The planned cost to achieve these synergies has also increased slightly, but the company still expects adjusted segment EBITDA to reach approximately 31% by year five. In the first quarter, underlying sales growth was 10%, with process and hybrid businesses leading the way. Intelligent devices and software and control also saw growth, while discrete automation was down as expected.

In the first quarter, all regions of the world saw strong growth, with Asia, the Middle East, and Africa leading the way. Test and measurement exceeded expectations, contributing $382 million to sales. Backlog increased by $500 million, and Emerson's adjusted segment EBITDA margin improved by 190 basis points. Adjusted EPS grew by 56%, driven by double-digit sales growth and operating leverage. Free cash flow also improved by 51% compared to the previous year. While AspenTech sales were slightly weaker than expected, it did not have a significant impact on overall results.

In the first quarter, ACV grew close to 10% and the AspenTech team saw strong market dynamics in power transmission and distribution, sustainability and decarbonization. They also utilized relationships with Emerson to win in LNG, life sciences, and power generation. Test and measurement orders were in line with expectations, down 17% year-over-year but showing sequential improvement. Sales were $382 million, beating expectations due to stronger backlog conversion and lower-than-expected sales during the 11-day stub period. Test and measurement's adjusted segment EBITDA margin was 26.5%, higher than expected due to higher sales, better gross margins, and cost synergies. Test and measurement contributed $0.13 in the first quarter, including stock compensation expense and using the test and measurement tax rate. The stub period dynamic benefited the adjusted EPS contribution by approximately $0.02. Second quarter sales are expected to be around $350 million, following the typical seasonality of stepping down from the December quarter end.

The company expects a second quarter adjusted EPS contribution of $0.07, with increased expectations for the full year due to strong Q1 performance. Sales are expected to be $1.5 billion to $1.6 billion, with a ramp-up in Q2 and turning positive in Q4. The company thanks the test and measurement team for their excellent work. Guidance for Q2 and full year 2024 has been increased, with expected underlying sales growth of 4.5% to 6.5%, driven by process and hybrid businesses. FX is expected to be flat compared to a 1-point headwind in November guidance. Operating leverage, excluding test and measurement, is expected to be in the low to mid-40s in 2024.

The company's full year target has been modestly reduced due to a decrease in sales volume and an increase in adjusted EPS. The company is still expected to meet its free cash flow guidance and has completed a share repurchase in the first quarter. For the second quarter, the company expects underlying sales to increase and adjusted EPS to be between $1.22 and $1.26. The backlog has increased significantly, and the company expects to sustain mid-single-digit order growth. The MRO business remains strong.

The paragraph discusses how the company's revenue in Q1 was strong and is expected to remain robust throughout the year, providing a strong base of order activity. The funnel also grew despite the $400 million worth of projects that were won in the first quarter. The company expects a recovery in discrete markets in the second half and is seeing early signs of positive return in markets like semiconductors. The company did not change their free cash flow guidance despite a better quarter and outlook, but they did mention potential increases in acquisition-related costs and CapEx.

The company's guide for $2.6 billion to $2.7 billion was maintained, with $250 million called out in November tracking as planned. A $50 million increase in cash flow was not taken up, but the company feels better about the cash flow guide. In the first quarter, earnings and sales were both increased, and the company expects the $1.55 billion guidance to be linear from the $350 million in Q2 sales.

The company saw a strong performance in test and measurement, with sales being pushed into the quarter. They also expect a positive impact from orders and sales in the third and fourth quarter for the discrete business. The CEO was asked about the impact of the administration's actions on LNG approvals in the U.S. and how it may affect the company's business.

The speaker is disappointed with the administration's decision to hold export permitting for LNG, but they have confidence in their forecast for 2024. The projects they are currently executing in North America are not expected to be impacted, and they continue to see growth in other regions. The non-approved U.S. projects are included in their funnel for the next three years, and they believe their initial synergy estimates for NATI were conservative.

The speaker, Lal Karsanbhai, discusses the increased cost synergies and the integration process following the acquisition of a company. He credits the success to a strong management team and a shared vision with the acquired company. The team is confident in their ability to achieve the synergies faster than originally planned. A question is asked about cultural integration, but the speaker and another team member, Ram Krishnan, express confidence in the similarities between the companies and their customer-centric approach. The speaker wishes the team luck and the call moves on to the next question.

The speaker, Mike Baughman, is addressing a group of people and discussing the company's recent acquisition of National Instruments. He mentions that they have accelerated the timeline for synergies and raised it by $20 million, but there are no offsets to this increase. He also confirms that their 31% margin target is still on track and there are no changes to their long-term profitability expectations. Another speaker, Ram Krishnan, adds that there are no identified offsets and if they find good investment opportunities, the margin target may increase. Nigel Coe, one of the attendees, asks about the strong growth numbers within the ID department, specifically the 28% growth in measurement analytics, and suggests that it may be due to an easy comparison.

The speaker addressed concerns about the process and hybrid markets being on a lag and whether the current growth in discrete automation is a precursor for future growth. They explained that the secular drivers for these markets are strong and there is more discipline in capital layouts, leading to a more moderated capital cycle. They also mentioned that the measurement solutions business saw a 28% increase due to supply chains coming back and the electronics challenges from last year being alleviated.

The speaker discusses the company's recent sales and orders numbers, attributing the increase to easier comparisons with the previous year. They also mention a transformation in R&D at their test and measurement division, which involves prioritizing projects and bringing discipline to resource allocation. The other speaker adds that the company will always have a role in research and innovation due to its market position and technology.

The speaker discusses the importance of having viable commercial programs and investing in certain cars to ensure customer success. They also mention a recent win with DG Fuels, which was a holistic 100% Emerson win across the entire automation stack. The speaker then addresses concerns about the sustainability of high single-digit orders growth in the process industry, given the trend of large customers prioritizing shareholder returns over process investments.

The speaker, Lal Karsanbhai, recently returned from a trip to the Middle East and believes that the demand for sustainability and energy transition will continue to drive orders in the company's process sector. He also expects the backlog to grow at a sustained mid-single-digit rate. In regards to the second quarter, there is no major change in mix or trajectory, but the EPS at the midpoint is increasing by $0.02, mostly due to a decrease in test and measurement earnings.

The speaker, Chris Snyder from UBS, asks about the Q1 performance and full year guidance for National Instruments. He also inquires about the company's margins, which have been a strong point in recent years. The company's CFO, Colleen Mettler, clarifies that the full year guidance has remained consistent since November, and the slight change in the margin guidance is due to a change in foreign exchange assumptions.

The speaker is asked about expectations for revenue synergies in National Instruments. They mention that the focus has been on cost synergies, but they are also working on customer-specific ideas for sales synergies. They mention the potential for growth in the EV batteries and semiconductor markets. They also address concerns about the macro environment in China and mention that they are not heavily exposed to areas like real estate that are facing pressure.

In paragraph 23 of the article, Lal Karsanbhai discusses the company's growth in China and expects it to continue in the mid- to high single digits for the year. Ram Krishnan adds that the core process hybrid business, power and chemical, will drive growth, with test and measurement consistent with the discrete business. The company remains positive on the environment and there is no change in the organic outlook. In terms of the strength in measurement and analytical, there were easier comps, but the stacks improved sequentially.

The speaker discusses the normalization of supply chains and the backlog of orders in the measurement and analytical business. They also mention the profitability of growth platforms and the difference between MRO and project activity, but state that there is not a significant difference in the mix within the funnel. They also mention their $150 billion installed base.

The company obtains a large portion of its revenue through service contracts with global customers for replacement and maintenance. There are also upgrades and other activities that contribute to revenue. The price/cost guide for the year remains unchanged at 2 points, and there is no significant inflation affecting the company's costs. The company is focused on driving down direct material costs and has seen a decrease in logistics costs. The conference call has now ended.

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