Emerson Electric (NYSE: EMR), Carrier Global (NYSE: CARR), and Allegion (NYSE: ALLE) are all smart buys now for two reasons. First, their respective management teams are aggressively restructuring their businesses toward attractive long-term growth markets. Second, if you only invest a relatively small amount, it’s a good idea to minimize trading costs by holding stocks for an extended period, and the growth prospects of all three justify holding them over the long term.
Emerson Electric and automation
Emerson Electric’s transformation toward becoming a pure-play automation company continues. It’s a long journey that started with the unsuccessful bid to acquire Rockwell Automation in 2017. Buying the company would have added Rockwell’s expertise in factory automation to Emerson’s strength in process automation (liquids and materials).
The bid failed, and since then, Emerson has slowly maneuvered toward automation anyway. It sold its majority stake in its climate technologies business to Blackstone for $9.5 billion in 2022. Furthermore, it recently announced it will sell its remaining share in the climate technologies business for $3.5 billion this year.
Meanwhile, it contributed its industrial software business and $6 billion in cash to industrial software company AspenTech for a 55% stake in the new company in 2022. Emerson also completed a $8.2 billion acquisition of the automated test and measurement systems company NI in 2023.
The AspenTech and NI deals are in the adjacent markets of industrial software and test and measurement, and strengthen the company’s automation and the industrial software that powers it. Both are highly attractive markets to be in, as automation improves efficiency and accuracy while lowering costs, enabling manufacturing to be reshored in the U.S.
Meanwhile, advances in digital technology (digital twins, the Internet of Things, etc.) and the creation of smart factories and process plants powered by industrial software are creating step changes in the productivity of industrial activity. It speaks to an exciting future for Emerson…
..
