Emerson (EMR) merges software business with Aspen Technology – May 17, 2022

Emerson Electric Co. (EMR Free Report) recently announced that it has completed the combination of its industrial software activities with Aspen Technology, Inc. (AZPN free report). The cash and stock deal was announced in October 2021.

Emerson shares gained 0.9% yesterday to finally close the trading session at $84.45.

In the headlines

Emerson merged its software businesses, OSI Inc. and geological simulation software, with Aspen Technology to form the new AspenTech. Under the terms of the agreement announced in October, the transaction involved Aspen Technology shareholders getting $87 per share in cash and 0.42 shares of the combined entity in exchange for each share they held. As part of the deal, Emerson has offered $6 billion to own 55% of the combined entity while the remaining 45% is held by Aspen Technology shareholders.

With this transaction, Emerson will take control of a leader in high-value industrial software, accelerate its software strategy and realize substantial synergies, thereby increasing value for its shareholders. With this majority stake in the new AspenTech, Emerson will likely gain the flexibility and platform to strategically deploy capital for growth through investments and acquisitions. The transaction is expected to create a win-win scenario for both companies as it strengthens the business alliance between them and strengthens their partnership in sharing technology, driving innovation and developing new products.

Shares of the new AspenTech will use the ticker symbol “AZPN” (formerly Aspen Technology’s ticker symbol) for trading on the Nasdaq beginning May 17, 2022.

Zacks Ranking, Price Performance and Estimates Trend

Emerson, with a market capitalization of $50.2 billion, currently carries a Zacks Rank #3 (Hold). The company is poised to benefit from the strength of its discrete life sciences, chemicals and energy end markets. In addition, the company is likely to benefit from acquisitions it has made over time. However, escalating costs and expenses are a major concern for the company. In addition, high debt levels may increase Emerson’s financial obligations.

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Over the past three months, the company’s shares are down 9% from an industry decline of 13.4%.

Over the past 60 days, Zacks’ consensus estimate for company earnings rose 1.2% to $5.05 for fiscal 2022 (ending September 2022), while the same thing for fiscal year 2023 (ending September 2023) was increased by 0.9% to $5.42.

Key Choices

Some top-ranked stocks in the Zacks Industrial Products sector are outlined below.

AZZ inc. (AZZ Free Report) currently boasts a Zacks Rank #1 (Strong Buy). You can see the full list of today’s Zacks #1 Rank stocks here. Its earnings surprise over the past four quarters averaged 22.3%.

Over the past 60 days, AZZ’s earnings estimates have increased 12.6% for fiscal year 2023 (ending February 2023). Its shares have lost 11.2% over the past three months.

Regal Rexnord Corporation (RRX Free Report) currently has a Zacks Rank #2 (Buy). Its earnings surprise over the past four quarters was 5.4%.

Over the past 60 days, RRX earnings estimates have risen 1.5% for 2022. Regal Rexnord shares have lost 21.3% over the past three months.

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