EMR - Emerson Electric called top stock pick at Morgan Stanley

2023-03-29 09:21:49 ET

Emerson Electric ( NYSE: EMR ) this week was named as the Top Pick among the stocks of industrial companies by analysts at Morgan Stanley. They said the technology and engineering company has a growing backlog and is likely to avoid overpaying for acquisition target National Instrument ( NATI ).

“We believe Emerson ( EMR ) will get National Instrument ( NATI ) at a reasonable price or walk away,” Joshua Pokrzywinski, analyst at Morgan Stanley, said in a March 27 report. “Our initial impression that management may overpay for a business with limited fundamental overlaps has been replaced by a better view on discipline and more constructive view on synergy potential.”

Emerson ( EMR ) in January announced a bid to acquire National Instrument ( NATI ) for $53 a share at an implied enterprise value of $7.6 billion. Since then, rival bidders have emerged such as Fortive ( FTV ) and Keysight ( KEYS ), according to press reports citing people familiar with the matter.

Morgan Stanley selected Emerson ( EMR ) as a Top Pick after receiving commentary from investors about its upgrade last week of Emerson ( EMR ) to Overweight from a prior recommendation of Equal weight.

“We believe Emerson ( EMR ) could be willing to go higher than its $53 bid but expect management would still walk away before $60,” according to Morgan Stanley. “Based on feedback [from investors], we believe shares potentially work more as a trade if management walks away given a reset on capital allocation and the removal of the overhang. An outright deal could be better and open the door for longer-term investors to start looking as there would no longer be uncertainty around capital deployment.”

Seeking Alpha contributor The Value Investor rates Emerson ( EMR ) as a Hold on its valuation and uncertainty with the bid for National Instrument ( NATI ).

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