EMR - Emerson Offers Portfolio Transformation And Leverage To Process Market Recoveries

• Emerson is enjoying strong demand in HVAC and improving demand in refrigeration and tools, while discrete and hybrid automation markets lead a recovery ahead of process industries.
• Management seems likely to reduce its oil/gas exposure further, but a lot of the core automation technologies could be applied to new markets like hydrogen.
• Climate is a core business now, and Emerson is likely to be more active as a buyer than as a seller, with software a particular priority.
• Emerson isn't undervalued on a core basis, but there's at least a relative value argument as Emerson shares don't enjoy the EBITDA multiple that its margins and returns would otherwise merit.

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