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Shares of Emerson Electric (NYSE:EMR) are up 1.3% in mid-day trading Wednesday following reports overnight from Bloomberg News that the company is in talks with private equity firm Blackstone (NYSE:BX) to sell at least a part of its commercial and residential solutions business for between $5-$10 billion.
If a deal happens, it would be just the latest in a string of reshuffling moves by Emerson. In August, Emerson announced it would sell its garbage-disposal unit, InSinkErator, to Whirlpool (NYSE:WHR) for $3.0 billion. In the fall of 2021, Emerson announced it would merge its software units with Aspen Technology (NASDAQ:AZPN) in a deal valued at about $11 billion.
Stephens analysts view the latest possible deal news as positive and expect the stock to perform well through earnings and into November’s Investor Conference as sentiment improves.
“We reiterate OW and expect EMR to perform well today, through earnings and into November’s Investor Conference, where sentiment should be buoyed with each step toward shaping a better-connected portfolio of higher-technology, higher-growth businesses,” they commented.
Given the various potential outcomes from a commercial and residential solutions business, the analysts are reserving judgment on implications for earnings and valuation. That said, they reiterated their views that most of the assets in the segment “would fetch a multiple well above EMR’s current average.”
They added that thematically they would be supportive of Emerson divesting the remainder of the Tools & Home platform, which with the pending InSinkErator deal, would leave the company with “leading, cohesive Automation and Climate segments and attractive sum-of-the-parts optionality.” The analysts maintained a $120 price target on the stock.
