Friday, May 01, 2009

Emerson (NYSE:EMR): Upgraded to Buy from Neutral at Merrill/BAC

Merrill Lynch/BAC is upgrading Emerson (NYSE:EMR) to Buy from Neutral while establishing a whopping $50 tgt on the name (vs. prev. $32 tgt)

Lagging share price creates opportunity
EMR has significantly lagged its industrial peers during this recent rally – Merrill thinks driven by concerns that trough earnings for Emerson occur much later than other perceived shorter cycle plays. However, they think earnings for most industrials are likely to trend lower in 2010, which they think puts EMR on more of a comparable footing to close the performance gap with other industrials.

Emerson business outlook appears to be turning higher
Firm thinks the outlook for Emerson’s business, on average, has also begun to turn up. For instance, Emerson has the largest direct exposure to China at ~9% of revenues. Roughly 75% of the company’s products are estimated to be tied to infrastructure spending which should benefit from global stimulus efforts. In addition, roughly one quarter of Emerson’s product mix sells into economically sensitive end markets – mostly in North America – that should benefit in a U.S. recovery.

Future order rate improvement could boost sentiment
Emerson’s orders also appear to be hitting trough levels at down over 20%. Consequently, once the rate of order decline begins to ease – possibly later this year – they think the stock could also respond favorably.

Notablecalls: That $50 tgt will surely catch traders attention and cause the stock to move above the $35 level.

PS: I know I should be making fun of the Research in Motion (NASDAQ:RIMM) upgrade out of UBS this morning. I won't, though - the fact they upgraded it here is retarded enough.

"I'll bet you wished you had fed the rest of me to the dogs."
Gary Oldman as Mason Verger

"No, no Mason I prefer you the way you are."
Sir Anthony Hopkins as Hannibal

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