Thursday, November 4, 2010

Emerson Electric (NYSE:EMR) Should Finish 2010 Strong, but Cooper (NYSE:CBE), Illinois Tool (NYSE:ITW), 3M (NYSE:3M), Tyco (NYSE:TYC), Wesco (NYSE:WCC), and Actuant (NYSE:ATU) Have More Upside

FBR Capital said they like the portfolio mix of Emerson Electric (NYSE:EMR), and maintained their "Market Perform on them, although they said they believe competitors like 3M (NYSE:3M), Cooper (NYSE:CBE), Illinois Tool (NYSE:ITW), Tyco (NYSE:TYC), Wesco (NYSE:WCC), and Actuant (NYSE:ATU) have strong growth potential.

"With regard to the shares, we like Emerson’s portfolio mix at this stage in the cycle, and we expect continuing positive trends in the company’s mid- to late-cycle businesses. Even as near-term incremental margins could be muted in the 25%–30% range as the company boosts investments, we see positives in the higher long-term growth trajectory. That said, at 15.6x our above-consensus estimates, EMR shares are trading at a 12% P/E premium to large-cap peers, and we see greater upside to our price targets in Cooper (NYSE:CBE), Illinois Tool (NYSE:ITW), 3M (NYSE:3M), Tyco (NYSE:TYC), Wesco (NYSE:WCC), and Actuant (NYSE:ATU). We are increasing our FY12 EPS estimate from $3.75 to $4.00, reflecting better growth"outlook," said FBR.

Emerson closed Wednesday at $54.58, losing $0.14, or 0.26 percent. FBR raised their price target on Emerson from $58 to $60.

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