Key financial results
- Fourth Quarter: Fourth quarter underlying sales grew 7% and adjusted segment EBITDA margin expanded 160 basis points to 29.1%.
Underlying sales were up 7% and with software and systems accelerating to 14% growth
- Earnings: Adjusted earnings per share increased 15% to $1.86 for the fourth quarter.
adjusted earnings per share increased 15% to $1.86
- Full Year: Full year underlying sales grew 4% and adjusted earnings per share rose 10% to $6.59.
For the full year, we delivered underlying sales growth of 4% and adjusted earnings per share rose 10% to $6.59
- Free Cash Flow: Free cash flow for the full year increased 9% to $3.5 billion, representing an 18.6% margin.
Free cash flow was up 9% to $3.5 billion
Business segment results
- Software & Systems: Software and Systems underlying sales grew 14% with Test and Measurement up 15% and Control Systems and Software up 14%.
Software & Systems was up 14% underlying as Test & Measurement grew 15%
- Software & Systems: Software and Systems margin expanded 490 basis points to 32.3% due to volume leverage, price/cost, and mix.
Software and Systems margin of 32.3% increased 490 basis points
- Intelligent Devices: Intelligent Devices underlying sales grew 4%, supported by final control project shipments in the Middle East.
Intelligent Devices underlying sales were up 4%, better than expected
- Intelligent Devices: Intelligent Devices margin decreased 10 basis points year-over-year to 28.4% due to mix.
Intelligent Devices margin of 28.4% was down 10 basis points year-over-year
- Safety & Productivity: Safety and Productivity underlying sales grew 2% as electrical products and U.S. industrial activity offset European weakness.
Safety and Productivity was up 2% underlying.
- Safety & Productivity: Safety and Productivity margin increased 30 basis points to 22.9% due to price/cost and cost reductions.
Safety and productivity's margin of 22.9% was up 30 basis points year-over-year
Capital allocation
- Share Repurchases: Emerson completed $1 billion of share repurchases in 2026, retiring 7.2 million shares.
we completed $1 billion of share repurchase, retiring 7.2 million shares
- 2027 Plan: The company plans to return $3.8 billion to shareholders in 2027 through $2.5 billion in share repurchases and $1.3 billion in dividends.
we expect to return $3.8 billion in 2027, $2.5 billion in share repurchases and $1.3 billion in dividends
- Dividend: The dividend per share will increase by 7%, adding $0.16 to reach an increased payout.
a 7% dividend per share increase of $0.16
- Q1 Buyback: Management intends to front-load approximately $1.5 billion of share repurchases into the first quarter of 2027.
Industry trends and dynamics
- Orders: Underlying orders grew 14% in the fourth quarter with broad-based demand across all business groups.
Underlying orders grew 14% and with broad-based demand across all business groups.
- Growth Verticals: Growth verticals increased 21% year-over-year, supported by secular tailwinds across greenfield projects, modernizations, and MRO.
Our growth verticals were up 21% year-over-year as secular tailwinds are supporting investment
- Project Funnel: The project funnel increased $600 million sequentially to $13 billion, up 17% year-over-year.
project funnel which increased $600 million to $13 billion, up 17% year-over-year.
- Backlog: Backlog ended the quarter at $8.2 billion, up 11% year-over-year, with a book-to-bill ratio of 1.01.
Backlog ended the quarter at $8.2 billion, up 11% year-over-year, and our book-to-bill was 1.01
Competitive landscape
- AspenTech: Emerson realized $100 million of synergies at AspenTech, completing the integration two years ahead of target.
We also realized $100 million of synergies at AspenTech, completing the integration 2 years ahead
- Project Wins: Major wins included an ethylene cracker complex project in Qatar and Phase II expansion for LNG Canada.
First, we were selected for a major petrochemical project in Qatar
- Software Wins: Emerson signed a 10-year DeltaV MES subscription agreement with a leading global life sciences contract manufacturer.
Emerson signed a 10-year DeltaV MES subscription agreement with a leading global life sciences contract manufacturer.
- Pricing Power: The company maintains strong positioning across categories, supporting a normal 2% price realization.
That's normal level of pricing. I think it's supported by our positioning in almost every category
Macroeconomic environment
- Regions: North America and the Middle East led regional growth with high single-digit increases, offset by persistent softness in Europe and China.
Underlying sales growth was led by the United States and the Middle East, both of which were up high single digits, offset by persistent softness in Europe and China.
- Europe: Europe was down 1% in 2026, with continued weakness in industrial markets across Germany, France, and Italy.
Europe was down 1% in 2026. And we project a modest improvement to low single-digit growth
- China: China orders remained negative due to overcapacity and weak demand in chemical and refining markets.
China orders remain negative as both chemical and refining continue to weigh on demand.
- Middle East: The Middle East and Africa grew 3% in 2026 despite an approximately $85 million headwind related to the regional conflict.
collectively grew 3% in 2026, including an approximately $85 million headwind related to the conflict
Growth opportunities and strategies
- Electrification: Electrification is benefiting Emerson across the technology stack through power generation projects, modernizations, and grid investments.
Electrification is benefiting Emerson across the technology stack as power generation projects
- LNG Pipeline: The remaining LNG opportunity pipeline stands at 275 million tonnes per annum.
and we now see an opportunity of 275 million tonnes per annum remaining.
- Growth Verticals: Growth verticals are expected to grow low double digits in 2027, driven by electrification, energy security, and nearshoring.
We expect low double-digit growth in 2027, driven by secular trends of electrification, energy security and yousuring
- Software ACV: Annual contract value of software grew 10.1% to $1.7 billion in 2026 and is expected to grow approximately 10% in 2027.
As expected, annual contract value of our software grew 10.1% to $1.7 billion.
Financial guidance and outlook
- 2027 Sales: For fiscal 2027, Emerson guides underlying sales growth of approximately 5%.
For fiscal 2027, we are guiding underlying sales growth of 5%.
- 2027 Margin: Adjusted segment EBITDA margin is expected to reach 29%, up 80 basis points year-over-year.
We expect to deliver adjusted segment EBITDA margin of 29%
- 2027 EPS: Adjusted earnings per share for 2027 are guided to $7.25, up 10% year-over-year.
adjusted earnings per share of $7.25
- 2027 Cash Flow: Free cash flow for 2027 is expected to be between $3.8 billion and $3.9 billion.
free cash flow of $3.8 billion to $3.9 billion.
- Q1 Guidance: First quarter 2027 underlying sales growth is expected to be approximately 5%, with adjusted segment EBITDA margin of 28% and adjusted EPS of $1.58 to $1.62.
We expect GAAP and underlying sales growth of approximately 5% and adjusted segment EBITDA margin of 28% and adjusted earnings per share of $1.58 to $1.62.
Q4 FY2026 results
| Metric | Result | Change |
|---|---|---|
| Q4 Underlying Sales Growth | 7% | Up 7% versus prior year |
| Q4 Adjusted Segment EBITDA Margin | 29.1% | Up 160 basis points |
| Q4 Adjusted Earnings Per Share | $1.86 | Up 15% |
| Full Year Adjusted Earnings Per Share | $6.59 | Up 10% |
| Full Year Free Cash Flow | $3.5 billion | Up 9% |
How management sounded
Balanced (+35 on our -100 to +100 scale). Management expressed strong confidence backed by 14% underlying order growth, meeting strategic objectives, and expanding adjusted segment EBITDA margins. Management sounded more upbeat than on 20% of the 302 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Read the analyst Q&A summary and guidance and outlook for this call.
What to watch before the next call
- The trajectory of industrial markets in Europe and China.
- Geopolitical stability and status quo in the Middle East.
- Execution of share repurchases, including the planned $1.5 billion in Q1 2027.
Earlier calls
- Q3 2026 (Aug 4, 2026), tone Balanced: Emerson Electric reported Q3 underlying sales growth of 6% and raised full-year sales and EPS guidance.
