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Call sheet · Q2'26

Emerson Electric (EMR)

Q2'26 earnings call · held May 5, 2026 · compared with the Q1'26 call · management-credibility review
10/12
Disclosure score
2 medium, 4 low flags
Financial quality
Bottom line
The real story is Test & Measurement quietly becoming EMR's growth engine - up 12% with guidance raised to low-teens, driven by semi/aerospace strength that should persist. Middle East crisis is masking this acceleration and creating a buying opportunity since the revenue impact is temporary displacement, not destruction. The binding constraint is actually China chemical exposure which management finally admitted is structural ('over-capacitized and very weak'), not cyclical. Most revealing quote: 'Double-digit for Test and Measurement is sustainable for the next couple of quarters' - they rarely make sustainability claims this specific. My view changes if ACV growth doesn't accelerate in Q3 to support the 10%+ guide, or if T&M growth proves to be just cyclical bounce rather than share gains.

The 30-second version

  • SLEEPER STORY: Test & Measurement quietly becoming the growth engine while everyone obsesses over Middle East
  • Middle East conflict creates immediate pain but sets up massive rebuild opportunity
  • China chemical exposure finally getting acknowledged as structural headwind

What changed this quarter

MetricQ1'26Q2'26Change
Underlying Sales Growth2% (vs 6% prior year)5% (vs 2% prior year)+300 bps acceleration quarter-over-quarter
Adjusted EPS$1.46 (+6% YoY)$1.54 (+4% YoY)5% sequential growth, decelerated YoY
Test & Measurement Growth11% YoY12% YoYSustained double-digit momentum
Software ACV Growth9% YoY to $1.6B9% YoY to $1.64BConsistent at $40M quarterly add
Underlying Orders Growth9%5%400 bps deceleration but Middle East impact
Software & Systems Margin31.3% (+20 bps YoY)29.2% (-250 bps YoY)210 bps sequential decline from renewal drag
Intelligent Devices Growth2% underlying-1% underlying300 bps deterioration, Middle East impact
Backlog$7.9B (+9% YoY)$8.2B (+9% YoY)4% sequential build, steady YoY
Book-to-Bill1.131.0760 bps decline but still above 1.0
Free Cash Flow$202M (14% margin)$694M (15% margin)244% sequential jump, on track for 10% growth

Accountability tracked

8 new promises made4 narrative shifts flagged6 prior promises scored
Inside the full report
The complete write-up covers the full promise ledger with kept/missed calls, disclosure-quality scoring, the metrics-vanished check, verification items, and the questions to ask next quarter.
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Scores, kept-promise rates, and flags on this site reflect the author's opinion, applying a stated methodology to statements management made on public earnings calls. Informational and educational purposes only - not investment advice, a recommendation, or an offer to buy or sell any security. Sources believed reliable but not guaranteed; the author may hold positions in the securities discussed.

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