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Emerson Buys GeoFields, Boosts Pipeline Solutions Portfolio


In a bid to strengthen its foothold in pipeline solutions for oil and gas industry, Emerson Electric EMR recently announced the acquisition of GeoFields, Inc.

GeoFields is a global supplier of software and implementation services for the oil and gas industry and the deal will also create new opportunities for Emerson. Further, the company will be able to expand its digital portfolio with the GeoFields software and services for pipeline integrity management, which would offer asset reliability solutions for its customers. The terms of the acquisition were kept under wraps.

Acquisition Rationale

Emerson already enjoys a stronghold as a comprehensive pipeline solutions provider globally and believes this buyout will enable it to expand portfolio of pipeline solutions for the oil and gas industry. This acquisition will also allow Emerson to perform risk modeling and high consequence area (HCA) risk analysis, collect critical integrity data as well as prioritize pipeline integrity-related maintenance activities.

Emerson’s Expansion Plans

Emerson intends to pursue growth and expansion of core business through acquisition of companies or assets that aid growth of its service offerings. Some of the notable acquisitions made by the company in recent times include Pentair Valves & Controls, Locus Traxx and PakSense. While the integration of Pentair’s Valves & Controls business will allow Emerson to bolster its presence in control, isolation and actuation business lines, the Locus Traxx and PakSense buyouts are likely to help widen the scope of cargo solutions.

Our Take

Recently, the company has reshuffled and streamlined business, in order to optimize operational structure as well as boost profitability. In the past six months, this Zacks Rank #3 (Hold) company has returned 8.6%, outperforming the industry’s average gain of 7.5%.

For the company’s Automation Solutions segment, favorable trends in power and life sciences and improving MRO spending by oil and gas customers is anticipated to boost growth. Moreover, the company is bullish about the prospects of its Commercial & Residential Solutions segment as it is witnessing improving trends in the United States, Europe and Asian construction markets. The company believes this segment to grow in mid-single-digit growth in fiscal 2017, on the back of a favorable outlook for global demand within its served markets.

In view of recent optimistic order trends and recovering end markets, Emerson raised outlook for fiscal 2017 for the third consecutive time.

However, macroeconomic factors like sluggish economic conditions, recession and adverse conditions in the end markets are impeding growth for the company. Further, prolonged softness in the oil and gas markets has affected both capital spending and operational expenditure of clients, consequently marring Emerson’s prospects.

Stocks to Consider

Some better-ranked stocks from the same space include Barnes Group, Inc. B, Colfax Corporation CFX and Allegion PLC ALLE. While Barnes Group sports a Zacks Rank #1 (Strong Buy), Colfax Corporation and Allegion PLC carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Barnes Group has surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 11.6%.

Colfax Corporation has outpaced estimates thrice in the preceding four quarters, with an average earnings surprise of 8.2%.

Allegion PLC has surpassed estimates twice in the trailing four quarters, with an average positive earnings surprise of 2.0%.

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