Emerson at Wells Fargo Conference: Navigating Growth and Challenges

Published 10/06/2025, 22:08
Emerson at Wells Fargo Conference: Navigating Growth and Challenges

On Tuesday, 10 June 2025, Emerson Electric Company (NYSE:EMR) participated in the Wells Fargo Industrials & Materials Conference 2025, offering a strategic overview of its recent performance and future plans. The company highlighted strong sales growth and a focus on software-driven operations while addressing challenges such as tariffs and market competition.

Key Takeaways

  • Emerson reported a 2% increase in underlying sales, driven by strong performance in process markets.
  • The company is advancing its Project Beyond initiative, aiming for a software-centric transformation in automation.
  • Emerson is managing tariff impacts through strategic pricing and cost reductions.
  • The energy sector accounts for 20% of Emerson’s revenue, with significant growth in LNG projects.
  • Management remains confident in achieving a 4% to 7% growth algorithm, supported by digital transformation trends.

Financial Results

  • Underlying Sales and Orders:

- Sales increased by 2%, with notable strength in North America, the Middle East, India, and Asia.

- Overall orders rose by 4%, with process orders up 6% and discrete orders recovering to 3%.

  • Power Generation and Software Revenue:

- The power generation business represents 10% of total revenue, valued at $1.8 billion.

- Software Annual Contract Value (ACV) grew by 11%, trending towards $1.5 billion.

  • Profitability and Capital Allocation:

- Gross profit margins stood at 52%, with EBITDA margins at 28%.

- Emerson plans to deploy $2.5 billion in capital for share buybacks and bolt-on M&A in 2026 and 2027.

Operational Updates

  • Demand Trends and Greenfield Activity:

- Stable demand trends with minimal tariff pre-buy impact.

- Robust greenfield activity in LNG projects, particularly in Texas and Louisiana.

  • Project Beyond:

- Aiming to shift from analog to digital and ultimately autonomous control through its Enterprise Operations Platform (EOP).

- Software revenue currently accounts for 13% of total revenue, with ambitions to increase this share.

  • Tariff Impact Management:

- Addressed $245 million in tariff impacts through $190 million in price increases and $55 million in cost reductions.

Future Outlook

  • Growth Algorithm and Order Momentum:

- Confident in maintaining a 4% to 7% growth algorithm, bolstered by automation and sustainability trends.

- Order exit rates align with growth targets, positioning Emerson for success in 2026.

  • Innovation and Debt Reduction:

- Focused on organic innovation, dedicating 8% of investments to R&D.

- Committed to reducing net debt to EBITDA to less than 2 by 2027.

Q&A Highlights

  • Demand Resilience and Industry Growth:

- Resilient demand in process industries, with mid-single-digit growth expectations.

- Test and Measurement sector anticipated to drive double-digit orders growth.

  • Competitive Landscape and Margin Improvement:

- Competitors like Schneider and Honeywell present challenges, but Emerson’s technology stack provides a competitive edge.

- Margin improvements achieved through strategic pricing, cost management, and software revenue mix.

For further details, readers are encouraged to refer to the full transcript below.

Full transcript - Wells Fargo Industrials & Materials Conference 2025:

Unidentified speaker, Analyst: All right, good afternoon everyone. Thank you for being with us. We are excited to continue the discussion with Emerson and very happy to have Ram Krishnan, COO of Emerson and Colleen Mettler,

Ram Krishnan, COO, Emerson: who runs IR. Thank you both so much for being here with us. Great to be here.

Colleen Mettler, Head of IR, Emerson: Thank you.

Unidentified speaker, Analyst: We’re just going to jump into Q and A. If over the course of the discussion you have a question, just raise your hand and I’ll get to you. And that way we won’t pause periodically. To kick things off, we’ll just do the standard start in terms of demand With the nature of the question, why has demand been resilient when we think about the kind of elevated uncertainty that we’re in, you see kind of PMI new order index trends. What are your observations on demand and why it’s been a little bit more resilient or better than fear here?

Ram Krishnan, COO, Emerson: Yes. I think we just finished a pretty strong quarter. Underlying sales for us were up 2% driven by the process markets and geographically where we saw strength was North America, Middle East, India and rest of Asia. Those have been strong markets. From an orders perspective, orders were up 4% in the quarter, process was up 6% And that’s really where the strength of our business lies.

Discrete recovered nicely to 3% with T and M at plus 8% and we are seeing the Discrete recovery come back. But to go back and answer your question, the fundamental strength we see is in the capital cycle and Process for us still remains robust. That will be driven by North America, Middle East, India and rest of Asia. And in select markets where LNG, the capital cycle is still very strong. Our power generation investments, power is about $1,800,000,000 business for us, about 10% of overall Emerson.

That capital cycle with new power generation capacity globally has been very strong, driven by data centers, of course, but fundamentally that investment cycle still continues. Life sciences has been a strong end market for us. So we still have a pretty robust capital funnel. It hasn’t been impacted by tariffs and we continue to see these projects progressing and hence the confidence that as we laid out in our earnings call, the orders momentum strong as we exit Q2, we expect the discrete recovery to continue into the second half and then the process dynamics still remain strong at about mid single digits.

Unidentified speaker, Analyst: And then just in terms of monitoring of demand trends and the degree to which think there was some concern on whether we would see some pull forward of demand or whether there was pause in demand and now is

Ram Krishnan, COO, Emerson: there acceleration to try to take advantage of some, Just anything that you’ve seen in terms of distortions on demand trends versus it’s actually just been pretty steady to trend? I think overall pretty steady. I mean, have pockets of businesses, which we sell through distribution and we’ve seen a little bit of pre buy prior to the tariffs getting into impact and then maybe a slowing in the month subsequent to that, but that’s a very, very de minimis amount. Overall, I think demand trends pretty stable globally and certainly North America where we should have seen the biggest impact, we haven’t seen anything.

Unidentified speaker, Analyst: And let’s talk about customer investments in particular in North America and what you’re seeing on the Greenfield, Brownfield side of things with a little bit of backstory on what the conversations have been like and if you’re seeing any momentum building there with investments in The U.

Ram Krishnan, COO, Emerson: S? Yes, certainly, I mean, I think where the greenfield activity has been the most robust and a biggest part of our project funnel is LNG in Texas and Louisiana, continued investment in life sciences, modernization opportunities or digital transformation opportunities in chemical, petrochemical and then greenfield power, gas fired power capacity that is coming online in The U. S. And all of those conversations continue to be pretty robust. Now obviously on some of the LNG projects when the tariff discussions were at their height, certainly demand pricing of LNG from an export perspective, as well as the cost of inputs in building out these facilities was an unknown that frankly has certainly cleared in the last thirty days.

There are many projects and we’ve been in recent customer conversations where FIDs are getting approved and those projects are regaining momentum. Certainly more certainty in terms of price and demand for the LNG and more certainty as it relates to the cost of

Unidentified speaker, Analyst: the input. And if you think about that project related demand, just talk about the maturity of those demand trends across something like life sciences, power, LNG, kind of where you think you are from say like a cycle maturity point on the growth investments there?

Ram Krishnan, COO, Emerson: I would say certainly power, early cycle, in terms of that years of investment that has to happen if the data center vision has to play out and the amount of power generation capacity that has to come online, I would say early. Life sciences, I would say mid cycle, primarily driven by weight loss and GLP-one and some now you saw significant announcements by the life sciences majors on capacity that’s going to happen here. Now, is it net new or does it take away on investments that we would be getting if the investments were made in Europe? That’s debatable. Will all of those manifest at the pace and scope that they have outlined?

Debatable, but net net, I would say early to mid cycle on life sciences. And then certainly similar on LNG, I think there’s another 100 MTPA of capacity that has to be added over the next three years. And so I think that journey will still continue. So none of these would be late cycle. I would say power is early.

The other two would be early to mid.

Unidentified speaker, Analyst: And I

Colleen Mettler, Head of IR, Emerson: think I would add, as you think about the LNG cycle, as we talked about in February earnings, we were already in a wave. It began in 2021. We were continuing to win at a clip 50% -plus, depending on where we play there in terms of the competition on the automation content. And as we look forward, obviously, the moratorium slowed things up a little bit in terms of awards to EPCs. But where we sit today and looking forward over those next three years, it’s a possibility of about $1,000,000,000 worth of orders for Emerson, considering our win rate and considering the automation content opportunity there.

Unidentified speaker, Analyst: That’s helpful. Let’s shift it to back half of the year orders because you gave those expectations with the most recent earnings. And I want to talk about on the Process side and then the Discrete side. And so the Process side is mid single digit type of growth. So just give us a sense of the visibility that you have into it and what it means for underlying demand trends.

Is this an acceleration in demand from half to or steady? Just any color there.

Ram Krishnan, COO, Emerson: So off, simple math. If the absolute magnitude of orders holds flat to the half, you’re going to see very close to the forecast we’ve given in terms of the order So simply said, there’s not a lot of sequential acceleration built into the overall dollar orders or dollar billion of orders that we have in the flat.

Unidentified speaker, Analyst: So It’s a total comment, right?

Ram Krishnan, COO, Emerson: Not just that’s a total comment. Now Process Industry, again, going back to the confidence we have in the size of the funnel, the pace at which, mean, the last quarter, we won close to $350,000,000 of that project funnel, the $11500000000.0.1500 project funnel we show. So nothing in that funnel or the pace at which projects are moving through the funnel gives us any pause as it relates to the mid single digit process order forecast and that’s remained consistent and we feel pretty good. The discrete recovery, certainly the momentum in Test and Measurement is real. We see that momentum happening and the power of comparisons is going to play out where T and M is going to see double digit orders growth as we get into the half.

Certainly the discrete business, even if it holds flat to the current pace, we’ll see high single digit orders growth in the half. The only caution we had in the earnings call was Germany, which is Europe and then China factory automation is something we’re watching. We would have hoped we would have seen a little more momentum in that in Q2. Now we’ll see how Q3 pans out, but that’s probably the only area within the scope of our discrete business that we’re watching. But the power of easier comparisons is going to drive good order momentum and consistent with the chart we laid out in the earnings call.

Colleen Mettler, Head of IR, Emerson: And I was going say, we’ve consistently seen sequential improvement. So as we think about the performance Q1, Q2 and you look at both of those discrete businesses, we’ve continued to see sequential improvement. So as we look at the half, you look at the numbers that we have on the chart as we laid it out in earnings, not only is it on a low basis comparison, but as you march continuous with that sequential improvement, it helps to better define how we see the outlook of that line.

Unidentified speaker, Analyst: That sequential improvement, it comes back to the question, but is this like do you attribute this to, hey, we’re taking share in the market? Do you attribute this to customer budgets were just better this year and those dollars are flowing? Just to understand kind of what’s driving the sequential improvement.

Ram Krishnan, COO, Emerson: Yes. I think in the process industries and LNG and certainly life sciences and power, it’s a combination of good customer activity as well as share gains. The power of the technology stack that we now have as an automation company is certainly bearing fruit in many of these end markets where I think the power of Emerson solutions are panning out in share gain. I think in T and M, it’s certainly customer spending, which has been depressed for a long period of time, unlocking with more confidence in end markets, which is aerospace and defense, which I think is an important end market where everybody is spending and spending with confidence now that new administrations are in play. The portfolio business, which is the 35,000 customers that Test and Measurement sells to, I think restocking, integrators getting more confident.

Certainly, only segment we haven’t seen any momentum in the Test and Measurement side, which is in the Discrete side is EVs. But outside of that, I think more confidence in the end markets and more confidence in where the economy is going.

Unidentified speaker, Analyst: It’s a good segue to kind of the next topic, which is Project Beyond, some recent announcements there. And so I want to kind of work through this in a few different questions. But basically announcements that you made around software defined enterprise operations and a platform that you’re building there, and this news was coming out in May. So just put some perspective around this for us and how big a deal this announcement is for Emerson?

Ram Krishnan, COO, Emerson: Yes. It is obviously a very important deal, big deal for us and a big deal for the industry. And simply said, I mean, today, Emerson, we deploy software defined automation solutions to automate mission critical industries, power, life sciences, refining, chemical, you name it. Any industry that has the flow of fluids and requires model predictive control to run production operations, we have the complete tech stack of all the measurement and analytical sensors, the brains, which is the control systems, our Delta V innovation control systems, all of the final control elements that bring the process back into control, the valves and the regulators. And most importantly, the optimization software with AspenTech that truly extracts productivity and helps customers deliver top quartile production operations.

So off that complete tech stack provides the foundation for our vision of boundless automation. Now over the last twenty years, most importantly in the last ten years, we’ve accelerated the industry from analog control to digital control. So today, many of our customers run digitally connected plants with digital protocols, microprocessor based valve control or instrumentation or sensing points and certainly a digital architecture for the control system, be it Delta innovation. And that’s been a fundamental technology shift with a lot of innovation like electronic marshaling and wireless and capabilities that we built into DeltaV innovation that drove that technology transformation. Today, are poised now with AspenTech in our portfolio to take that to the next level, a digitally connected plan to a journey through a journey towards autonomy, a vision for an autonomous refinery, an autonomous power plant, data centric and software defined.

So that’s our vision. Simply said, there’s a lot of data. In order for autonomy, what do you need? You need data. You need that data which is trapped in a control system, trapped in their reliability systems.

All the OT silos that exist in a plant, in a refinery or a power plant, we have to have the ability to liberate that data, contextualize that data, democratize it for use in applications that can reside in the edge of the cloud, which modern computing allows us the ability to do that. And so we have laid out architecture for a data centric software defined approach to enterprise automation. That is our vision of Boundless Automation. The enterprise operations platform, which is simply said, Delta V Ovation and Aspen coming together in a software platform that allows customers to deploy automation at an enterprise level, working on a unified data platform is our enablement of this boundless automation vision. And that’s the journey we’re driving.

What does that mean? What that means is today, control systems and optimization software is a $30,000,000,000 market. A of it is software, two thirds of it is hardware and services. We have an opportunity to move that to two thirds software, 1 hardware and services to deliver on this vision. And that enables our $4,000,000,000 business to grow at a differentiated rate and fundamentally transform to a more software centric business.

Unidentified speaker, Analyst: And your percent of software revenue today?

Ram Krishnan, COO, Emerson: Today is 13% of the overall company. It’s a of this $4,000,000,000 business. Now we still need all of the sensors and final control elements, are $4,500,000,000 businesses each. They will remain and they will grow with innovation within what is happening there and benefit from the overall tech stack share gains we drive, but the manifestation of the enterprise operations platform and the value unlock will come in our Software Control business. And so we’re talking about that $4,000,000,000 opportunity and that’s growing then Differentiated growth, differentiated margin, rule of 45.

Unidentified speaker, Analyst: Yes. When do we start hearing about this and you start saying, hey, we just like really moved the needle, revenue related to boundless automation or software mix?

Ram Krishnan, COO, Emerson: Great question. I think the whole it’s a ten year journey, but you’re going start to see manifestations of it in product launches, margin unlock and growth of the $4,000,000,000 segment. So watch that closely. There are six key elements of what it takes for us to bring the vision of the enterprise operations platform to life. A modern computing environment, which are product launches like Delta V Edge and Delta V PK Flex that you’re going to see, networking and connectivity, unified data operations, cyber security delivered in software defined way, zero trust architecture, AI orchestration, so a lot more AI launches with our product lines and then an app marketplace where our customers can deploy applications in the cloud.

So you’re going to start to see product releases in these six areas that build to this ultimate vision. Our industry certainly wants to see momentum in these technologies being deployed and then you’re going to start hearing about more holistic implementations of the enterprise operations platform over time. So you’ll start seeing the results as building blocks eventually. This is a journey. It’s the same journey.

The analogy I use is when ERP companies 20 ago came into an Emerson or other companies that used multiple, not even ERP systems, fundamentally finance systems or workflows that weren’t automated and sold the vision of a relational database, which captured all the finance, HR, supply chain data and gave you an end to end Oracle or an SAP solution to automate finance, HR procurement. That is exactly what we’re trying to do on the OT side when it comes to production reliability, sustainability and safety. It is a journey, but I think it’s been achieved on the office side and we will have an opportunity to deploy that on the OT side.

Colleen Mettler, Head of IR, Emerson: And I think as you think about the ten year journey as you get there, so tomorrow in the future, you want to create a project, you can flip the switch, you can apply this new solution. We are going to bring our customers along. We understand and recognize customers have made investments, ten, twenty, thirty years’ worth of investments, and they can’t flip the light switch tomorrow. They can’t rip and replace everything they have there today. So a lot of the product launches, the innovation is also being put into place to bring our customers along with us on that journey, putting in new products that they can quite literally set it on top of the infrastructure that they have today to bring out the software, to bring out the data that they have, so that they can have old facilities and new facilities leveraging kind of that same architecture that we’re going to be bringing.

So I think that’s really important to understand as well. It’s a journey to get to that future end state, but we’re going to bring those customers along with us. They’re going to have to take time to adopt it. There’s going to be certain industries that move faster than others. We know and understand and recognize all of those.

Unidentified speaker, Analyst: So we hear an analogy that ERP systems and it’s like that could be very disruptive for a period of time. What you’re saying is it sounds like likening it in terms of the magnitude of impact, but the actual implementation. Yes. It’s going to

Ram Krishnan, COO, Emerson: be a more it’s a focused implementation where we’re deploying innovation to help customers protect their existing investments, mostly on the sensing and final control side because they don’t have to that generates the data and performs the function of sensing and actuation. But they can keep all those assets protected. We have and even their own control systems or even competitive control systems, we have a product called IO Connect that brings all that data to our enterprise operations platform without ripping and replacing, because the magic is in actually liberating that data, contextualizing it, running insights, which is algorithms on that data to drive action to up the performance or reliability or safety. And that magic happens with software, which is what the software driven data centric approach is. But that doesn’t mean you have to rip and replace the data sources.

The sensors are good sensors. The actuation is good. The valves are good. The old control systems have a role to play. So I think it’s a, and when customers see that vision, they’ll obviously over time displace and modernize control systems and other parts of their infrastructure.

Unidentified speaker, Analyst: Last one for you on this topic is just where is the competition on this path?

Ram Krishnan, COO, Emerson: I mean, I think the competition sees the vision. I think Schneider, for example, with the capabilities they have are certainly thinking through that. I think Honeywell, I would argue that our technology stack with the seed, decide, act architecture, which is the sensing, the controls capability with Aspen, which I think is the true differentiator and frankly, our final control elements. I think we are we’ve got the breadth and the technology leadership position to leapfrog, but I think the competition is also well positioned. And I think they’ll come along in this journey because I think it’s good for the industry and good for our customers.

Unidentified speaker, Analyst: Wanted to shift to kind of overall growth algorithm for the business. And so when we think about back to the last Investor Day and you talked about a 4% to 7% kind of target growth range and from 22% to 24 you did better than that, right? And ’20 five, we’re talking about four. And so I think there’s a lot of focus on comps and having grown at the pace you grew, what is the growth algorithm moving forward? And so just talk about how you’re thinking through that and the growth opportunity for Emerson moving forward?

Ram Krishnan, COO, Emerson: Yes. I think given the secular tailwinds that we see around automation, digital transformation, sustainability and decarbonization, certainly the investments that are being put in place for energy security and affordability and sovereign self sufficiency that you see and reshoring of industries like life sciences or LNG for that matter in the pockets, I think we feel very confident that the growth algorithm of 4% to seven can continue. Now simply put, you have this year’s underlying four but the order exit rates are well in the four to seven band, just the discussion we just went through recently, which then sets up 26 in that framework. So this is multiple years we’re putting back to back in that four to seven algorithm. So simply put, I would go back to the secular drivers driving automation, our unique position with leadership positions in each of the capabilities that we have in this automation industry, 65% of our business MRO, 13% software, capital cycle still pretty robust with really the need for LNG or life sciences, metals and mining, power not going away in the near term, we feel pretty confident in that growth dynamic going into 2026 and beyond.

Unidentified speaker, Analyst: What’s the growth range on MRO? It’s going to be a narrower range than what you would see on the brownfield, greenfield side of things, but just trying to think kind of through cycle ranges that you would typically because I’m trying to think about low 60% and then 13%. So three quarters is going to have decent growth.

Ram Krishnan, COO, Emerson: Yes. I would say the MROs, you can underwrite mid single digits with price as a growth factor. 13%, you could underwrite double digit, high single digit to low double digit from a software perspective. I mean, we just exited the quarter with 11% ACV growth in our it was $1,000,000,000 We’re trending towards 1.5 ACV and software. So you’re going to see that.

And so really the wildcard is the capital cycle as it relates to the piece that is not software, not MRO. And the MRO business for us over the last twenty years, but for a black swan event like COVID or the financial crisis has been pretty resilient. I mean, we’ve not seen customers back off on MRO spending. I mean, did see the energy markets correct in 2015 and 2016, where we saw a little impact to MRO. But at the end of the day, I think MRO is going to be pretty resilient.

So that’s the new growth algorithm for the new Emerson with 65% MRO and 13% software. So really the variable for our growth rates of 4% through 7% is how robust is the capital cycle.

Unidentified speaker, Analyst: Yes. That’s very helpful. Let’s shift to energy. So there’s a fair amount of focus on that as an end market, roughly 20% of revenue. Just unpack it for us a little bit in terms of what sits within that 20% in the different end markets that you’re serving within energy.

Ram Krishnan, COO, Emerson: Yes, 10% is gas, 10% is oil. The gas piece has LNG built into it. That 10% certainly has a capital cycle associated with it, pipeline investments, the LNG, new capital formations. The oil piece, which is refining as well as stream production, is predominantly an MRO play for us. The capital cycle has been very disciplined since 2017.

So there hasn’t been an over investment in oil production capacity, but for a few pockets in Saudi or some of the economies that truly rely on oil. So I don’t anticipate a correction. Those oil assets, it’s more exploitation of existing capacity than new exploration. That’s good business for us. It’s high margin business for us.

It won’t contribute in a meaningful way to our growth algorithm, but it doesn’t hurt our growth algorithm, and we make a lot of margin in that business. So I think simply put, 10% of the new company is exposed to MRO oil. And I think that’s a great position for us to be in. Everything else is going to benefit from a capital cycle.

Colleen Mettler, Head of IR, Emerson: Yes. I was going to say, haven’t given out an industry split since 2023. But as Ram described it, oil is going to kind of play in that band of 10 ish plus percent, maybe 10 to 15% depending on the time frame. But absolutely, I think it’s a bit of a misnomer. I know I constantly have conversations with investors concerned about oil prices in our business.

And I think it comes to a surprise to many as we talk about the MRO exposure and really where that piece of the business is exposed to in terms of that recurring maintenance and repair type of activity.

Ram Krishnan, COO, Emerson: And when you think about those verticals that would be most well positioned as early adopters on this future state of automation and more software, how would energy fit into? Well, I would say energy would be at the back of the line. I would say life sciences would lead. Power, I think, is a very important market that would make the transition. Metals and mining, where autonomous operations are going to play a very important part, given the nature of the industry, would play in.

So I think refining would probably be one of the industries that would be last to get in. And then digital transformation of upstream, I think, would also be at the back part of the cycle.

Unidentified speaker, Analyst: So let’s shift it to margins. You’ve got 2025, it’s pacing about 400 bps ahead of 2022, north of like a 50% incremental margin. And so talk about some of what you’ve and you’ve been doing this by the way through all the transactions you’ve done as well and a few disruptions out there. So it’s been really impressive. Talk about what’s driven that from kind of Emerson just operating system and then other initiatives that would have been contributing.

Ram Krishnan, COO, Emerson: I think a lot of factors, right? I think the underpinning of it is certainly our management system and the way we manage price, price staying ahead of cost and inflation, a programmatic approach to cost reductions. Obviously, in the last three years, we saw the benefits of T and M synergies come through $200,000,000 certainly synergies that helps in the margin, the mix associated with software and obviously the new entrance into the portfolio coming in at accretive margin. So combination of factors to truly drive world class incremental leverage well north of the 35% we guided when we laid out the framework. I think the last quarter we delivered 180% that was driven by outperformance at Aspen.

Certainly the software mix had a role to play. I would the company now sits at 52% segment, GPs. So I think we will as we go into this cycle and lay out plans for 2026 and beyond now that the portfolio transformation is complete, we will revisit our leverage algorithm. It will be in the 40s. We’ll get that out as we lay out the plans for 2026 and beyond.

Just historical performance has truly demonstrated that. I mean, this year, I think we’re going to we guided in the 60s for the full year. We obviously outperformed in the half. So I think the power I think going back, the important metrics are 65% MRO, where we have the ability to get at least two points of price a year, maybe a little more, and software, which gets escalation and obviously is a high margin business and a faster growth as the mix element and how it contributes to leverage. So I think we’re well positioned on margins.

I think 28% EBITDA margins in the quarter were really good. And so at this point, if growth continues in the 4% to seven algorithm, I wouldn’t be concerned about margins. I think we’re well positioned.

Unidentified speaker, Analyst: Let’s shift to capital deployment just where you are at this juncture with the portfolio and I think some recent kind of developments on safety and productivity and how you’re thinking about that within the portfolio, but also just appetite for inorganic growth?

Ram Krishnan, COO, Emerson: Yes. So very simply put, I mean, we’ve laid out our plan until 2027. Right now, we’ll exit the year at net debt to EBITDA at 2.3. Our programmatic approach to paying down that debt, our commitment is to get net debt to EBITDA less than two by 2027, exiting 2027. Commitment to the dividend, billion 2 of dividend will continue with high focus on protecting our dividend over ’twenty five, ’twenty six and ’twenty seven and beyond, which fundamentally with the debt pay down leaves about $2,500,000,000 of capital to be deployed between share buybacks and bolt on M and A in 2026 and 2027.

And we’ll throttle that based on opportunities we see. Think certainly we’ll be disciplined. I think bolt on acquisitions for us is about $1,000,000,000 as definition of bolt ons. I mean, obviously, companies have other definitions. So we’ll stay in that range.

We do believe the power of our technology stack, what we’ve assembled in the last three years is unmatched. And we’ve got to really put our head down and execute and pivot our investments towards making the enterprise operations platform a reality because the value unlocked with organic investment, 8% of our investment is in innovation and R and D. And that’s really where we’re going to be focused, delivering on operational execution, getting the EOP launched and manifesting in value unlock for the company, driving the migration to software revenue. And that’s really where we’re focused. We don’t have a lot of gaps.

With that said, we see opportunities in software. We always will. We’ll see opportunities in select markets in T and M. So we won’t give up any opportunities, but I don’t see clearly big transformational investments in inorganic M and A outside of bolt on at least until the end of twenty twenty seven.

Unidentified speaker, Analyst: And that I mean, there was software that moves to Aspen Correct. Now back. How much better are you at running software businesses today?

Ram Krishnan, COO, Emerson: I know a lot more. Yes, I would say a lot better. I think one of the benefits where even when we had the Aspen structure is the Delta V business learned a lot from how Aspen drove subscriptions, how they drove customer success, how they managed gross retention, net retention. I mean, terminologies which were alien to us, we have a better grasp of. And we have a great software business outside of Aspen.

Mean, DeltaV and Ovation standalone software, certainly the software within NI are great software businesses. So I think we have learned a lot and we’ll continue to get better in managing software going forward.

Unidentified speaker, Analyst: And then I’d be remiss if I didn’t ask about tariffs and just what’s developed kind of over the past month or so. I think you sized it at kind of a $445,000,000 annualized rate when you announced earnings. Just based on development since then, any way you’re thinking about the current kind of tariff cost impact to you?

Ram Krishnan, COO, Emerson: Yes. So we sized it at I think $4.55 annually, $2.45 this year. All of the $2.45 covered with 190 of price and 55 of cost out actions. We are still staying focused on surcharges and pricing, even though the $245,000,000 in theory has been alleviated given if the China dynamics stick, but we haven’t changed our course of action until we see how all this ends up in the month of July or August. So at this point, our demand has held, the pricing is holding.

In theory, the $2.45 exposure should be a little lower and certainly the $4.55 should be lower if the current direction holds. But A, we haven’t really changed our viewpoint until we hear or see where that ends. And so for us, we’re just forging ahead with the plan that we communicated in our earnings call until we see things differently.

Colleen Mettler, Head of IR, Emerson: Yes. I think a lot of it has been temporary pauses or nothing permanent. And so I think from our stance, we’re going to continue to drive ahead with the programs that we laid out at earnings until more permanent type of finality comes to some of those decisions.

Unidentified speaker, Analyst: And how have you managed the pricing approach to those costs from a product perspective in terms of one for one pricing where this product faces 145% tariff or a little bit more spread it out? Like what have been the biggest price increases you’ve put in?

Ram Krishnan, COO, Emerson: Yes, I think our price increases haven’t I mean, remember, I think obviously the cost impact, I mean, it’s 145% on a particular part, but when it all translates, dollars $245,000,000 or even $445,000,000 only represents 2.5 of sales. So we’ve been able to on an annualized basis. So most of our price increases on select product categories have been in the 5%, 67% range. And that has been well understood and accepted by customers. Many implemented as surcharges, some implemented as permanent price increases.

So the magnitude for us hasn’t nothing’s been double digits. And a few have been high single digits, most have been mid single digits.

Unidentified speaker, Analyst: Perfect. Do you guys know how to take vacations? You’re going to have some time on your hands with that or a portfolio move. What are you going to do?

Ram Krishnan, COO, Emerson: Execute, man. We got to get this enterprise operations platform launched and customers migrating in that journey. There’ll be a few more geopolitical curveballs that we’ve drawn, so we’ll be ready for it. Thank very much. Thank you.

Appreciate it. Thanks a lot.

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