I wrote my first post about Emerson at the beginning of February (read more). It was a time, when share price was up to around $45 and after that rally began till around $54. I took it as missed opportunity as now shares are at $52 and probably it will be very difficult for me to buy. Anyway, when I wrote last post there was a spin off Network Power segment coming (Emerson named it Vertiv). How does a situation look like now?

First of all deal is not finished yet – it is expected to be finished by the end of September 2016 (“Started June 2015 — Targeted to be completed by September 2016 but most likely closing 4th Calendar Quarter — Signed by July / August 2016”). However the exact result of spin off is in my opinion uncertain as there are rumors that strategic investor might be interested – for example Siemens (read more). I think that such scenario is favorable for investors. If deal were to be valued at around $4b (vs market cap $33b) it would mean around 18 times EV/EBIT, which is far more than for Emerson Electric.

Anyway, as deal is only some relatively small part of whole market cap (10%) let’s look on others segments. Business is doing definitely better, but still dynamics on year on year basis are negative. Nevertheless trend has reversed and is positive.

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Which also affects Fiscal Year 2016 Outlook to be more positive and February guidance to be affirmed:

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Summing up, there was an awesome time to buy when investors were frustrated about deal and share price was low (it seemed like Network Power segment was valued for zero). Currently with share price of around $52, EV/EBITDA around 9.5 and P/E around 17 I see no special offer. However dividend yield of around 3.7% looks pretty attractive and rising oil prices should further positively influence business…

Disclaimer EMR – no position