UPDATE 2-Emerson to sell embedded computing unit as charge hits profit – Reuters

Aug 6 (Reuters) – Emerson Electric Co reported a
sharp drop in quarterly earnings on Tuesday, hurt by an
impairment charge for its embedded computing and power business,
and said it was selling a majority stake in the unit for about
$300 million.

Profit and sales missed Wall Street targets. The diversified
U.S. manufacturer, whose products include industrial controls,
power supplies and home-storage equipment, said earnings were
trending toward the low end of its forecast, which it had cut in
May.

Emerson said it would sell 51 percent of the embedded
business, which supplies technology used in communications and
computing equipment, to private equity firm Platinum Equity and
retain a noncontrolling interest.

“Continued weakness in the technology equipment and mobile
device markets that this business serves has resulted in lower
sales and earnings growth expectations,” Emerson said in a
statement.

The St. Louis-based company is taking a $503 million pretax
goodwill impairment charge for the business, which it said was
no longer a strategic fit.

Emerson plans to increase its share buybacks by $600 million
to offset earnings dilution from the deal, which it expects to
close in three to six months.

Net income fell to $194 million, or 27 cents per share, in
the third quarter ended June 30 from $770 million, or $1.04 per
share, a year earlier.

Excluding charges for goodwill impairment and for
repatriating cash from the embedded computing unit, Emerson
reported earnings of 97 cents per share. That was a penny below
the analysts’ average estimate, according to Thomson Reuters
I/B/E/S.

Revenue fell 2.2 percent to $6.34 billion, about $100
million below Wall Street’s target.

U.S. sales fell 3 percent, while revenue in Europe slumped 6
percent.

“Low levels of business investment continue to reflect a
cautious climate, particularly in mature markets,” Chief
Executive Officer David Farr said in a statement.

The company said it expected fiscal-year earnings, excluding
items, around the lower end of its target range of $3.48 to
$3.55 per share. Analysts have been looking for $3.49.

Emerson forecast a rise of about 1 percent in fiscal-year
sales, slightly below prior expectations.

Through Monday, Emerson shares had risen about 18 percent
this year, slightly below the performance of the broader U.S.
market.