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Investing.com -- Emerson Electric Co. (NYSE:EMR) has been downgraded to “underweight” from “equal weight” by Barclays (LON:BARC) analysts, reflecting a cautious stance on the broader industrial outlook.
Shares of the engineering services company was down 6.4% in pre-open trade.
The downgrade comes as concerns over industrial capital expenditures mount amid macroeconomic uncertainty, policy risks, and sustained high interest rates.
Barclays analysts cite Emerson’s exposure to the oil and gas sector as a key factor in their downgrade decision.
The brokerage notes that capital expenditures in the oil and gas industry are expected to decline over the coming years, with ConocoPhillips (NYSE:COP) forecasting a peak in capex in 2025, followed by a projected decline of more than 10% between 2025 and 2028.
This slowdown in spending could weigh on Emerson’s revenue and profit margins, given its dependence on this sector.
The note flags broader softness in industrial capital expenditures, which has been exacerbated by heightened policy uncertainty and persistently high interest rates.
These conditions are making businesses hesitant to invest in fixed assets and capacity expansions.
Furthermore, falling lead times and potential tariff impacts have introduced additional headwinds to the multi-industry sector.
As a result, Barclays has also reduced price targets for multiple industrial capex-related stocks, including EMR, Gates Industrial (NYSE:GTES), Rockwell Automation (NYSE:ROK), and Regal Rexnord (NYSE:ZWS).
Barclays analysts acknowledge that while the overall market remains in a state of flux, they have maintained a Neutral stance on the multi-industry sector.
However, within this broader category, Emerson’s outlook appears particularly weak due to its oil and gas exposure and the potential for sustained downward revisions in earnings expectations.
Despite the downgrade, consensus sentiment on Wall Street remains largely positive on Emerson, with 75% of analysts maintaining a “buy” rating.
However, Barclays’ assessment suggests that market optimism may not fully reflect the emerging risks in industrial capex and energy-related spending.
The brokerage has lowered its price target on EMR to $110 from $135, representing a 19% reduction, while also making minor downward adjustments to its earnings per share forecasts for the next fiscal years.