EMR Emerson Electric 10-K 2026-09-30 section summaries

Emerson Electric Co. (EMR) — Item 1: Business

Business and markets

Emerson is a global automation company serving process, hybrid and discrete industries. Its portfolio includes automation devices, control systems, software and industrial AI. FY2026 sales by destination were 52% in the Americas, 30% in Asia, the Middle East and Africa (including 9% in China), and 18% in Europe.

Portfolio and reporting structure

Emerson says its portfolio actions are intended to build a more cohesive industrial technology portfolio with higher growth and margins. In March 2025, it acquired the remaining AspenTech shares for approximately $7.2 billion, making AspenTech wholly owned and part of Control Systems & Software. Emerson acquired National Instruments in October 2023 at an $8.2 billion equity value; it is now part of Test & Measurement.

Emerson sold a majority stake in Climate Technologies in 2023, retaining a 40% interest in Copeland. In August 2024, it sold that interest to Blackstone funds for $1.5 billion and sold its Copeland note receivable for $1.9 billion.

Effective FY2026, Emerson reorganized its management structure and revised its reportable segments, reclassifying prior-year amounts to conform. Its five segments are grouped into three business groups:

• Software & Systems: Control Systems & Software, including AspenTech and programmable automation controllers; and Test & Measurement.
• Intelligent Devices: Sensors (formerly Measurement & Analytical) and Final Control, including fluid and motion control from former Discrete Automation.
• Safety & Productivity: electrical equipment and materials joining businesses formerly in Discrete Automation.

The company’s solutions emphasize digital transformation, analytics, AI, automation, measurement, flow control and productivity.

Backlog

Estimated consolidated order backlog increased about 11.2% year over year. Approximately 70% was expected to be recognized as revenue over the following 12 months, with most of the remainder substantially recognized over the next two years.

Innovation and workforce

Research and development, engineering expense, and customer-funded engineering and development totaled 8.3% of sales in FY2026, compared with 8.1% in both FY2025 and FY2024. Initiatives include disruptive measurement technologies, software-defined automation, self-optimizing asset software and sustainability solutions.

Emerson had approximately 70,000 employees at September 30, 2026. Employee survey participation rose to 93% from 91% in 2025, while the engagement score increased to 80% from 79%. The FY2026 total recordable injury rate was 0.22, and the lost/restricted workday case rate was 0.15 incidents per 100 employees. A small portion of U.S. employees are unionized; some employees outside the U.S., particularly in Europe, are represented by employee organizations.

Competition and risks

Emerson competes in highly competitive markets against both larger, well-resourced companies and smaller players. Competition varies by product line and centers on product performance, quality, brand, service and price; global-cost manufacturing is part of the company’s strategy.

Raw-material and component prices can be volatile, and supply may be disrupted by natural disasters or other events. Materials have generally been available in sufficient quantities, and Emerson seeks multiple suppliers. Environmental and other regulations have not had a material effect to date, although future changes could impose significant operating restrictions and compliance costs. Management also oversees cybersecurity, compliance, legal, sustainability, financial and reputational risks.

Risk Factors

Emerson’s risk disclosures center on its ability to sustain demand and margins while adapting its portfolio and technology, managing global operations and supply chains, and meeting changing legal, cybersecurity, climate, and stakeholder expectations. These risks could adversely affect sales, cash flows, financial condition, and results.

Competition, innovation, and portfolio execution

Emerson competes on product performance, quality, service, price, and software in markets affected by capital and consumer spending. Larger, better-resourced competitors and smaller rivals could pressure prices, demand, margins, and market share; reliance on independent representatives and distributors also creates risks if they become financially unstable or favor competing products. Results depend on successful R&D, timely launches, and customer adoption as technology changes faster and product life cycles shorten. Emerson may not capture opportunities in electrification, energy efficiency, emissions management, battery storage, hydrogen, grid demand management, carbon capture, and advanced nuclear; adoption and returns depend on technology costs, economic growth, and climate policy.

Acquisitions and divestitures are recurring elements of Emerson’s growth and portfolio strategy. The company cites buying the remaining AspenTech shares and National Instruments, and divesting Climate Technologies, renamed Copeland. Its narrower portfolio emphasizes software, innovation, and disruptive technologies, but may be more volatile and exposed to market changes. Regulatory approvals, integration or separation challenges, partner cooperation, and failure to realize expected growth, profitability, or benefits on schedule could undermine results.

Global operations, supply chain, and funding

Emerson relies on inputs including steel, cast iron, electronics, rare earth metals, aluminum, brass, plastics, and petroleum-based chemicals. Multiple sourcing and commodity hedging may mitigate—but cannot eliminate—shortages, disruptions, or price increases that could raise costs, constrain pricing, weaken competitiveness, or delay shipments. A majority of manufacturing facilities are outside the U.S.; emerging markets generate over one-third of sales, and Emerson increasingly sources and produces there. Operations and suppliers face risks from natural disasters and climate effects, health events, labor strife, war (including Russia-Ukraine and Middle East conflicts), political unrest, terrorism, regulatory changes, and nationalization. Disruptions could cause lost sales or customers, and insurance may not fully cover losses.

Access to capital markets and bank credit lines supports investment, acquisitions, short-term borrowing, and refinancing. Market volatility could raise financing costs or limit access to funding. Customers, suppliers, and financial institutions may also fail to meet commitments. Attracting and retaining skilled personnel is important to performance.

Cybersecurity, intellectual property, and product risks

Cyberattacks—including advanced, AI-enabled attacks—could disrupt Emerson’s systems, products, customers, or third parties, expose confidential information or trade secrets, and lead to operational interruption, litigation, penalties, reputational harm, and higher protection costs. Privacy and data-localization requirements add complexity and potential fines. Patents, trademarks, copyrights, trade secrets, and confidential information may also be challenged, infringed, misappropriated, or exposed through employee theft or industrial espionage.

Failures in connected hardware, software, instrumentation, valves, or process-control products could result from design or manufacturing defects, supplier or contractor failures, cyber incidents, or other causes. A significant failure could have safety, regulatory, environmental, financial, and reputational consequences, including third-party claims and remediation costs. AI, machine learning, and autonomous agents offer operational and product opportunities but also pose accuracy, intellectual-property, privacy, cybersecurity, regulatory, and reputational risks; competitors may adopt these technologies more successfully.

Economic, trade, tax, and legal exposure

Recessions and end-market downturns could reduce sales and cash flows, prompt restructuring, and lead to goodwill or long-lived-asset impairments; expected restructuring efficiencies may be delayed or unrealized. International operations expose Emerson to currency movements, tax and regulatory changes, trade barriers, tariffs, and restrictions on investment or earnings repatriation. The filing highlights dynamic U.S. trade policy, including a February 2026 Supreme Court ruling that the International Emergency Economic Powers Act does not authorize tariffs, followed by retaliatory measures. Mitigation strategies may not offset tariff and policy effects, which could increase costs, disrupt supply chains, weaken demand, and harm results and financial condition.

Changes in tax rates, laws, interpretations, earnings mix, and overlapping OECD-related global minimum tax regimes could affect the effective tax rate, cash flows, and results. Although Emerson considers its tax provisions appropriate, audits or disputes could require tax-liability adjustments. Global operations also create exposure to anti-corruption, anti-bribery, export/import, antitrust, and anti-money-laundering rules, including the U.S. Foreign Corrupt Practices Act and U.K. Bribery Act. Controls cannot ensure prevention of misconduct by employees, agents, or business partners; violations could lead to investigations, substantial monetary or non-monetary penalties, shareholder lawsuits, higher compliance costs, reputational damage, and operational or financial harm.

Current and potential litigation spans intellectual property, commercial and government contracts, emerging technologies, M&A, employment and benefits, antitrust, compliance, accounting, trade, health and safety, product liability (including asbestos), and environmental matters. Some claims seek significant damages, and uncertain outcomes could materially harm results. Environmental-law violations or cleanup obligations could also entail substantial costs.

Climate regulation and sustainability commitments

More restrictive emissions limits and expanded ESG reporting, combined with inconsistent climate legislation and standards, create regulatory and economic uncertainty. Changes in environmental requirements could restrict operations or impose costs on Emerson, its products, or customers, adversely affecting capital expenditures, results, financial condition, and competitiveness.

Emerson has expanded sustainability reporting and announced aspirational greenhouse-gas goals and a net-zero ambition. Progress depends partly on commercially viable low-carbon technologies and energy sources, policy and economic conditions, supplier performance, workforce recruitment and retention, and customer engagement. Evolving standards may require changes to goals or reporting, and some products could become less attractive. Failure—or perceived failure—to meet commitments or stakeholder expectations could damage reputation, weaken stakeholder support, or result in enforcement, penalties, or litigation.

Cybersecurity

Emerson reports that no cybersecurity threat or prior incident has materially affected, or is reasonably likely to materially affect, its business, strategy, operating results, or financial condition. It identifies the potential for a successful cyberattack and its reliance on third-party providers as key exposures, and says internal and external response resources are prepared to respond.

The company’s global cybersecurity program is integrated with enterprise risk management. It includes a centralized incident-response operation available 24/7/365, layered security controls, documented escalation procedures, and regular reviews of incidents. Emerson also provides employee training through online education, simulated phishing, and other awareness initiatives.

Oversight and leadership. The Board oversees cybersecurity, with the Audit Committee overseeing enterprise cybersecurity risks and the Technology and Environmental Sustainability Committee overseeing cybersecurity risks related to Emerson’s products. The CISO leads the enterprise security program, updates senior management regularly, and briefs the Audit Committee quarterly. The CISO has more than 25 years of IT experience and has focused on cybersecurity since 2007.

Assessments and third-party risk. Emerson uses independent third parties to assess cybersecurity maturity and test controls. Key data centers, cloud environments, and enterprise IT undergo audits and certifications under the ISO 27001 framework; Emerson cautions that this does not mean it meets every ISO 27001 technical standard or requirement. Third-party-led cybersecurity tabletop exercises were most recently conducted in 2025. Because Emerson relies on external providers for certain critical infrastructure, solutions, and services, an internal vendor-management team assesses vendor and supplier risks.

Emerson (EMR) — Fiscal 2026

Dollar amounts are in billions except per-share data; fiscal years ended September 30.

Consolidated results

Sales increased 5% in FY2026, comprising 4% underlying growth and a 1% foreign-exchange benefit. Underlying growth reflected 3% higher price and 1% higher volume; software-renewal timing and the Middle East conflict reduced volume by approximately 1%. U.S. underlying sales grew 9%, compared with 1% internationally. By business group, sales increased 8% in Software & Systems, 4% in Intelligent Devices and 3% in Safety & Productivity. FY2025 sales had increased 3%, with 3% underlying growth.

Gross margin improved 0.6 percentage points, supported by pricing relative to net material inflation and $121 million of tariff refunds ($0.16 per share), partly offset by software-renewal timing. SG&A declined 0.4 percentage points as a share of sales, reflecting cost savings and sales leverage; it included a $30 million charitable-trust contribution funded from tariff refunds. Other deductions declined mainly because acquisition/divestiture costs were lower by $174 million, primarily AspenTech-related, and backlog amortization was $65 million lower. Intangibles amortization was $816 million versus $884 million; restructuring costs were $187 million versus $136 million.

Adjusted EPS growth moderated to 10% from 12% in FY2025. The FY2026 adjusted EPS bridge included operations +$0.47, noncontrolling interests +$0.13, corporate and other −$0.07, foreign currency +$0.09, net interest expense −$0.13 and share count +$0.06. Adjustments include amortization, restructuring, acquisition-related items, pension/OPEB mark-to-market, discrete taxes and certain gains and losses. The $121 million tariff refund benefited GAAP results, while the charitable-trust contribution reduced adjusted EPS by $0.12 per share under the reconciliation treatment.

Segment results

Software & Systems’ margin rose to 17.2% from 14.4%; underlying sales grew 7% (4% volume and 3% price), though renewal timing reduced volume by 2% and segment margin by about 1.5 points. Strength included power, life sciences, aerospace and defense, and semiconductors. Intelligent Devices’ margin was 25.2% versus 25.1%; underlying sales rose 3% as price offset flat volume. Middle East conflict reduced volume by 0.5%, China sales fell 11%, and Americas growth was strong. Safety & Productivity’s margin declined to 19.2% from 19.8%: underlying sales rose 2% as 4% higher price offset 2% lower volume, while higher restructuring costs weighed on earnings.

Cash generation

Operating cash flow increased 8%, as higher earnings were partly offset by increased operating working capital, including inventory. Total operating cash flow including discontinued operations was $3.978 billion versus $3.098 billion; FY2025 included about $0.6 billion of taxes paid on the Copeland equity sale.

Balance sheet, financing and shareholder returns

Debt declined after rising to fund the AspenTech acquisition, completed in March 2025 for approximately $7.2 billion. In March 2025 Emerson issued €500 million of 3.0% notes due 2031, $500 million of 5.0% notes due 2035 and €500 million of 3.5% notes due 2037. The company reported sufficient liquidity for at least 12 months and no revolving-facility borrowings. In February 2026, a $2 billion 364-day backup facility replaced the prior $3 billion facility, alongside a $3.5 billion five-year facility.

Dividends were $1.244 billion ($2.22 per share) versus $1.192 billion ($2.11 per share); share repurchases were $1.000 billion versus $1.167 billion. Emerson repurchased 7.2 million shares versus 9.3 million, with approximately 62.4 million shares remaining authorized at year-end. In November 2026, the board raised the annualized dividend to $2.38 per share.

Portfolio, outlook and other material items

Emerson continues to shift toward a higher-growth, higher-margin industrial technology and automation portfolio. National Instruments, acquired for $8.2 billion of equity value in October 2023, is reported in Test & Measurement. Emerson sold its 40% Copeland interest for $1.5 billion in August 2024 and sold its Copeland note receivable for $1.9 billion; the note sale produced a $279 million pretax continuing-operations loss in FY2024. FY2024 also included a $539 million discontinued-operations gain on the Copeland equity sale and a $79 million final distribution on a Vertiv subordinated interest.

For FY2027, Emerson expects continuing-operations net sales and underlying sales each to increase approximately 5%. It forecasts diluted EPS of approximately $5.70, including about $1.41 per share of intangible amortization and $0.14 of restructuring and related costs; adjusted diluted EPS is expected to be approximately $7.25. Forecast operating cash flow is $4.3–$4.4 billion and free cash flow $3.8–$3.9 billion, after about $0.5 billion of capital spending. Planned shareholder returns are approximately $3.8 billion: $2.5 billion of repurchases and $1.3 billion of dividends. The outlook assumes the Middle East conflict remains contained within the region.

Pension accounting, funding and risks

In FY2026 Emerson retrospectively adopted mark-to-market accounting for defined-benefit pension and OPEB actuarial gains and losses, recognizing them in earnings when incurred; prior periods were recast. The annual adjustment is recorded in Q4 using the September 30 measurement date and is excluded from adjusted EPS and segment results. The change does not affect cash flow, funded status, funding requirements or benefits payable. Retrospective application reduced retained earnings and increased accumulated other comprehensive income by $251 million each as of October 1, 2023, with no change to total equity. FY2026 mark-to-market was $2 million of income versus $34 million of expense in FY2025.

At year-end, U.S. pension plans were overfunded by $886 million, approximately 33% above projected benefit obligations, including $145 million in unfunded plans. Non-U.S. plans were underfunded by $38 million, including $235 million in unfunded plans. Contributions were $38 million in FY2026; approximately $45 million is expected in FY2027. The U.S. discount rate was 6.41%, versus 5.27% in FY2025. A 0.25-point discount-rate decrease would increase projected benefit obligations by $100 million, raise FY2026 mark-to-market expense by $10 million and reduce FY2027 pension expense by $5 million; a 0.25-point decrease in expected asset returns would raise FY2027 pension expense by $10 million. The principal U.S. defined-benefit plan is closed to employees hired after January 1, 2016; future service accruals for remaining participants froze after December 31, 2024. A U.S. profit-sharing retirement program began January 1, 2025.

Pension results, impairment testing, acquired-intangible valuations, revenue recognition and tax balances depend on estimates and assumptions that may differ from actual outcomes. Legal exposures include general and product liability claims, including asbestos; the undiscounted asbestos reserve is based on projected claims through 2065 and includes defense costs. Management considered a material adverse impact unlikely, while acknowledging litigation uncertainty. It reported no known contingent liabilities believed material to the financial statements and no material commitments outside the normal course of business.

The OBBBA increased the FY2026 effective tax rate by about one percentage point, partly offset by favorable tax items reducing it by about two points; Emerson expects a slight OBBBA rate benefit beginning in FY2027. FY2026 adoption of ASU 2023-09 expanded income-tax disclosures without affecting results. Fiscal 2026 internal controls over financial reporting were reported effective, and KPMG issued an internal-control effectiveness report.

Item 7A — Quantitative and Qualitative Disclosures About Market Risk

Item 7A incorporates by reference the “Financial Instruments” discussion in Item 7; this section provides no separate market-risk figures or additional disclosures.

FY2026 financial performance

Emerson’s FY2026 sales and earnings increased, with gross margin improving and segment earnings growing faster than revenue. Cash generation also strengthened, while debt declined.

FY2026 included a $121M tariff refund recorded in cost of sales after a Supreme Court ruling on IEEPA tariffs; Emerson contributed $30M of it to a charitable trust. Interest expense, net of interest income, rose to $334M from $237M. Diluted weighted-average shares declined to 562.0M from 566.7M.

Segment results

Segment earnings are Emerson’s segment performance measure, before interest and income taxes. The Software & Systems and Intelligent Devices rows are group subtotals, not additional segments.

Test & Measurement moved from a loss to positive earnings; Safety & Productivity earnings dipped despite higher revenue. Reconciliation items reported were corporate stock compensation of $237M (from $263M), unallocated pension and postretirement costs of $125M (from $114M), corporate and other deductions of $211M (from $455M), and net interest expense of $334M (from $237M). Corporate and other included $70M of acquisition/divestiture costs in FY2026, compared with $255M in FY2025, primarily related to AspenTech.

Cash flow and capital

Working capital used $338M of cash, versus $9M in FY2025. Emerson used $3.222B in financing, including $1.000B of repurchases, $1.244B of dividends, and $588M of long-term debt payments. Dividends per share were $2.22, up from $2.11.

Balance sheet, debt and shares

Other intangible assets comprised customer relationships ($5.245B; $5.801B in 2025), intellectual property ($2.941B; $3.411B), and capitalized software ($256M; $246M). Tangible equity, after deducting goodwill and other intangible assets from equity, was negative $5.790B. Total debt was $12.175B, down from $13.116B. Emerson repaid $587M of 1.25% notes at maturity; interest paid on long-term debt was $249M, versus $221M. It replaced an expiring $3B 364-day backup revolver with a $2B facility, alongside its undrawn $3.5B five-year revolver.

Shares outstanding fell from 562.8M at the start of FY2026 to 557.3M at year-end. The company repurchased 7.2M shares and reissued 1.7M treasury shares. Stock-based compensation expense was $237M, with $238M of unrecognized compensation expected to be recognized over 1.3 years. Year-end awards included 4.002M incentive shares not yet earned (assuming 100% payout) and 2.611M unvested restricted shares and units.

Business developments, accounting and risks

Backlog for unsatisfied or partially satisfied performance obligations was approximately $9.6B; about 70% was expected to be recognized within 12 months, with most of the balance over the following two years. Contract assets were $2.162B and contract liabilities $1.164B, leaving net contract assets of $998M. FY2026 revenue included $794M previously recorded in opening contract liabilities.

Emerson completed its approximately $7.2B purchase of AspenTech’s remaining shares in March 2025. Its FY2026 five-segment structure reflects a broader focus on automation, industrial software and AI, analytics, sensing, and connected tools. In FY2024, Emerson sold its retained 40% Copeland interest for $1.5B and its note receivable for $1.9B; the note sale generated a $279M pretax loss. The October 2023 National Instruments acquisition had $8.653B of consideration, including $3.442B of goodwill and $5.275B of other intangible assets.

Beginning in FY2026, Emerson retrospectively adopted immediate mark-to-market recognition of pension and postretirement actuarial gains and losses. The change increased FY2026 pretax earnings by $17M ($14M after tax; $0.02 per share), versus reducing FY2025 pretax earnings by $29M ($23M after tax; $0.04 per share); it did not affect cash flow or plan funding requirements. Higher discount rates contributed to FY2026 actuarial gains. U.S. retirement plans were overfunded by $886M and non-U.S. plans underfunded by $38M; expected FY2027 contributions are approximately $45M.

Tax expense included a $185M deferred tax benefit, and FY2026 taxes paid net of refunds were $960M. Germany valuation-allowance releases reduced the effective tax rate by about one point, substantially offsetting an approximately one-point increase associated with the OBBBA. Unrecognized tax benefits rose to $326M; accrued tax interest and penalties were $57M. Emerson cited potential goodwill impairment exposure from Level 3 fair-value estimates and future cash-flow assumptions, as well as litigation and international operating risks. The auditor issued unqualified opinions on the financial statements and internal control; net sales was identified as a critical audit matter.

During the quarter ended September 30, 2026, CFO and Chief Accounting Officer Michael J. Baughman adopted a Rule 10b5-1 trading plan on September 11, during an open trading window. The plan may remain in effect until May 10, 2027, and permits him to sell up to 100% of the shares received from exercising and net settling options covering 5,347 shares. The earliest permitted first trade is December 11, 2026. No other Section 16 officers or directors adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter.