Emerson Electric’s Automation Advantage

Summary Emerson claims that it has transformed into a pure-play automation business. The company has an impressive portfolio of market leading businesses. However, we have a few concerns about the company’s claims. gorodenkoff Emerson Electric (NYSE: EMR ) is a leading player in the process manufacturing industry. Investors interested in industrial automation, driven by a labor shortage and reshoring megatrends, should consider Emerson a potential investment. In this article, we will systematically examine the company’s most important automation products, use cases, and competitive positioning to help readers arrive at a more informed position to assess the risk and rewards of owning the stock. Please refer to our recently published article for a broader discussion of the company’s business, risks, financials, and valuation. Note: This article is for educational purposes only and does not constitute financial or investment advice. Please do your own due diligence and consider your unique financial needs and constraints before buying any stock. Automation Overview Emerson 11/2022 Investor Deck Following a series of strategic acquisitions and divestitures, Emerson has positioned itself as a leading, pure-play provider of automation solutions. The company boasts a robust portfolio, with a particularly strong presence in the field of process automation. In recent times, Emerson has been focusing on expanding its hybrid and discrete automation business, with the aim of gaining share from industry leaders such as Rockwell Automation ( ROK ), which holds a dominant position in the field of discrete automation. The company expects ~$8 billion of proceeds from its recent divestitures, and is expected to pursue acquisitions in factory automation, test & measurement, smart grid, and industrial software. Next, we will explore each of pro-forma Emerson’s key brands: AspenTech, DeltaV, Ovation, Rosemount and Fisher. Emerson 11/2022 Investor Deck AspenTech Emerson acquired a 55% controlling stake in AspenTech ( AZPN ), which still trades in the public market. AspenTech is a global leader in asset optimization software that optimizes asset design, operations, and maintenance in complex, industrial environments. The company combines decades of process modeling and operations expertise with big data, artificial intelligence, and advanced analytics. Its purpose-built software improves the competitiveness and profitability of its customers by increasing throughput, energy efficiency, and production levels; reducing unplanned downtime, plant emissions, and safety risks; enhancing capital efficiency; and decreasing working capital requirements over the entire asset lifecycle to support operational excellence. The software combines AspenTech’s proprietary mathematical and empirical models of manufacturing and planning processes, reflecting the deep domain expertise the company has amassed from focusing on solutions for the process and other capital-intensive industries for over 40 years. The products have embedded artificial intelligence ( AI ) capabilities that create insights, provide guidance, and automate and democratize knowledge, known as Industrial AI, to create more value for the process industries. For customers beginning to consider how AI can be applied to their domain-specific challenges, AspenTech recently introduced its hybrid model methodology. This capability enhances first principles-driven models with AI to improve accuracy, safety, and predictability without requiring customers to have additional data science expertise. AspenTech has developed its applications to design and optimize processes across three principal business areas: engineering, manufacturing and supply chain, and asset performance management. Each business area leverages the company’s artificial intelligence of things (AIoT) products as the foundation of industrial data, to help realize its vision for Industrial AI at scale. The company is the recognized market and technology leader in providing process optimization and asset performance management software for each of these business areas. Emerson’s acquisition of AspenTech could have several strategic rationales. Some of the potential reasons include: Complementary Technologies: AspenTech’s software solutions are focused on process optimization and asset performance management, which complement Emerson’s existing portfolio of industrial automation and control products. By acquiring AspenTech, Emerson could expand its capabilities in these areas, and offer a more comprehensive set of solutions to its customers. Increased Market Share: By acquiring the company, Emerson could gain access to these new markets, and increase its share of the overall automation and control market. Synergy: AspenTech and Emerson’s solutions are focused on similar areas, such as process optimization, and both companies have a strong focus on software and analytics. By acquiring AspenTech, Emerson could leverage the company’s expertise and solutions to improve its own offerings, and create new opportunities for growth. DeltaV Emerson’s DeltaV business is a leading provider of digital automation systems for various industrial processes. The DeltaV system is a digital automation system that is used to control and automate processes such as […]

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