EMR - Emerson Electric downgraded to Neutral at UBS on full valuation

Emerson Electric ( NYSE: EMR ) on Wednesday was downgraded to Neutral from an investment rating of Buy by analysts at UBS. They said the company, which is working to transform itself into an industrial-technology giant, is fully valued amid an expected slowdown in the global economy.

“We are positive on Emerson’s ( EMR ) evolution towards an automation pure-play, with ample M&A capacity to further strengthen and diversify its portfolio,” Chris Snyder, analyst at UBS, said in a January 4 report. “However, a slowing macro outlook and lack of meaningful catalysts on the horizon support a Neutral view on the stock.”

Emerson is taking steps to build a bigger portfolio of industrial-automation services after last year’s purchase of a majority interest in AspenTech, the maker of software for what are known as process industries. Emerson also sold a majority stake in its climate technologies unit that makes heating, ventilation and cooling equipment and divested from InSinkErator, the maker of garbage disposals.

Because of this transformation, UBS is changing its valuation method for Emerson ( EMR ) from relative price-to-earnings multiples to a sum-of-the-parts analysis. The bank lowered its price target for Emerson ( EMR ) to $100 a share from $118 a share based on the new valuation framework and a lower estimate for EPS.

“Based on management commentary, further portfolio actions have been well telegraphed and our sense is that further automation M&A is already well established in investor expectations,” according to UBS.

The bank also downgraded Honeywell International ( HON ) to Sell from Buy and Hubbell to Sell from Neutral.

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