Emerson Electric Co. reversing the downtrend

Mar 7th, 2016 – Comment

Big W pointing to a trend reversal


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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EMR LOGO

Hello Lou,

I’d love to hear your opinion on EMR stock. Emerson (based in St. Louis) had $23+ billion in sales in FY15. Currently trading at $48+, has traded as low as $43+ recently which was the moving 12 month low. This stock is a dividend champ, raising the dividend for 59 years consecutively. Company’s customers are very much tied to oil and gas and they’ve announced major corporate restructuring into 2017. They’ve also announced they plan on spinning off their Network Power (Data Centre, Telecom) business into it’s own publicly traded company. That accounts for about a third of sales in the $8 billion range. They’ve also projected to have sales back up to around $30 billion by 2021.

My question, is now a good time to grow my position in the stock? Or, is it better to let the dust settle on the forthcoming changes, which are major (no doubt), before investing more? My concern is that the stock isn’t going to get much lower since results really can’t get much worse and I may be missing an opportunity.

How do I tell when up is the only direction it’s going to go? The dividend is an added bonus where I see potential in the stock price target going up as high as $65+ where it’s been in the past 24 months.

Thanks for your time, I’m a big fan and quite enjoy hearing you on AM640.

Take Care,

Mike

 

 

 

Hey Mike,

Thanks for the assignment. This will be the first time that I inspect the details surrounding Emerson Electric Co. (EMR NYSE). The company is focused on industrial automation controls and as you mentioned undergoing a restructuring in response to the challenges facing their customers.

Management intends to concentrate the company’s activities in automation, commercial, and residential solutions. A part of the plan includes finding acquisitions that support the rebuilding of their core.

What I try to communicate to readers and listeners on AM640 is to separate the message from the noise. In technical analysis we believe that in the price there is much knowledge. All the factors that you have mentioned plus all the others that have not been included in your evaluative process are concentrated in the price of EMR.

A survey of the charts will help answer some of the questions you have posed.

 

 

 

EMR

The three-year chart depicts the decline that started in 2014 as EMR suffered with its clients in the oil and gas industry. The chart illustrates a stock that has struggled with an established downtrend and a death cross that surfaced in August of 2014.

The W pattern that formed between October 2015 and February 2016 indicates that a trend reversal is shaping up.

 

 

 

 

 

 

 

EMR2

The six-month chart highlights the bounce off the 52-week low of $41.25  in January of 2016 and the subsequent advance that has taken the shares up and through the 50 and 200-day moving averages.

What is also evident are the buy signals generated by the MACD and the RSI concurrent with the bounce. The evidence at hand is confirming your evaluation. Start to accumulate EMR a slice at time to take advantage of pullbacks.

 

Next time I will re-examine the case for Teck Resources Ltd. (TCK.B TSX) for Jason.

Make it a profitable day and happy capitalism!

 

 

 

Categories: Automation
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