Q3 2025 Emerson Electric Co Earnings Call
Good morning and welcome to the Emerson third quarter 2025 earnings conference call.
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I would like to turn the conference over to your host, Colleen Mettler, Vice President of Investor Relations at Emerson. Please go ahead.
Good morning, and thank you for joining Emerson's third quarter 2025 earnings conference call this morning. I am joined by President and Chief Executive Officer, Wall Cards, and I.
Chief Financial Officer Mike Bachmann.
And Chief Operating Officer from Krishna.
As always, I encourage everyone to follow, along with the slide presentation, which is available on our website.
Please turn to slide 2.
This presentation may include forward-looking statements, which contain a degree of business risk and uncertainty.
Please take time to read the Safe Harbor statement and no note on non-gaap measures.
I will now pass the call over to Emerson's president and CEO law cars and bye for his opening remarks.
Thank you, Colleen.
Good morning, everyone.
I would like to begin by thanking the global Emerson teams for delivering yet another strong quarter.
With the support of Emerson's board of directors, we are energized by the company we have created. We have highly differentiated technology serving a diverse set of industries and customers.
And a compelling value creation proposition for investors.
Please turn to slide 3.
In May, we hosted approximately 3,000 attendees from 51 countries at the Emerson Exchange, where we showcased how Emerson is accelerating innovation to lead the future of automation.
Innovation is integral to Emerson Inn 3. Key product developments demonstrate the notable progress. We are making to advance our world-class industrial software portfolio.
First.
We announced a strategic collaboration with TotalEnergies, a significant milestone in realizing Emerson's Boundless Automation vision with our new Enterprise Operations platform.
Building on a nearly 30-year relationship, Emerson will deploy our industrial data fabric to continuously collect.
Store and contextualize millions of real-time data points from total energy facilities.
Providing secure and unified access to data across the organization.
The digital infrastructure, which also includes Emerson's advanced process control solutions.
We will enable the call for energy to optimize operational performance and accelerate AI implementation.
This data fabric, technology is foundational for Emerson's Enterprise operations platform.
The industry's first software-defined, OT-ready digital platform that seamlessly integrates and optimizes industrial operations.
Next.
We release the Ovation AI enabled virtual adviser, which is the first gen AI advisor, integrated into a control system for power generation.
The Ovation virtual adviser, as part of Ovation 4.0, enables advanced power plant diagnostics using Microsoft Azure OpenAI to increase productivity and operational awareness.
This highly differentiated solution is driving strong traction.
With over 80% of upcoming modernization projects involving an upgrade to Ovations 4.0.
for example.
Ovation was selected by energy to automate power. Generation. At 2, Greenfield combined cycle power plants.
Energy today provides electricity to 3 million customers and is expanding in Texas and Mississippi with 2,754 megawatt generation facilities.
Emerson was chosen for our leading technology, local presence, and enterprise scalability across multiple sites.
Third.
Emerson unveiled, Nigel AI advisor in its Market leading test software.
This innovation.
Will Aid engineers in unlocking, the full potential of our world-class software tools to address, the increasing complexity of test and measurement across Industries like semiconductor transportation and electronics.
Nigel can analyze.
Code and provide recommendations for improvements. When developing and executing tests through plain language prompts, enabling engineers to focus on their own innovation and business goals.
Please turn to slide 4.
Investments in automation continue to drive resilient demand in Emerson's process and hybrid markets as customers seek to modernize and improve their operations.
The discrete recovery progressed further, particularly in tests and measurement markets.
North America, India, and the Middle East and Africa have been strong.
And we expect these regions to remain growth drivers, which sustained investment across LNG.
Power and life sciences.
Our industrial software ACV again grew double digits over the prior year and ended the quarter at $1.5 billion.
Underlying orders grew 4%, led by Tesla measurement, which was up 16%, and without processing hyper businesses, again up mid-single digits.
Mro remained strong at 62% of sales with software and cyber security, upgrades driving increased activity. In long-term service agreements,
The dynamic, tariff environment, persisted and our exposure was less than expected in the quarter.
As a quarter progressed.
we decided to ease the scope of search charges which meaningfully impacted our third quarter sales growth,
Underlying sales growth was 3%, and we delivered excellent profitability.
Emerson's adjusted earnings per share of $1.52 met the top end of our guidance, and better-than-expected free cash flow generation led to a 21.3% margin.
My Bachmann will provide additional color on the results in a few slides.
Our teams are committed to completing a strong 2025.
And we are pleased to see the turn in our discrete and markets.
In the fourth quarter, we expect underlying sales growth of 5% to 6%.
Driven by further improvements in Tesla measurement.
Sustained growth in our process and hybrid businesses.
We project adjusted segment margins of 27%.
Higher than previously planned due to the impact of lower tariff exposure.
With adjusted EPS of $1.58 to $162.
As we look forward to fiscal 2026, we expect strong exit rates for underlying orders to support underlying sales within our growth framework.
Additionally.
We will be hosting an investor conference on November 20th in New York City.
We look forward to talking about our transport portfolio and a differentiated value creation framework.
More details will be communicated as we approach the conference.
Please turn to slide 5.
Emerson's demand Outlook remains healthy.
As expected.
Underlying orders in our process and hybrid businesses grew mid-single digits in the quarter and are expected to maintain similar growth in the fourth quarter.
The second need for energy security and affordability is leading to significant activity in LNG across the globe and increasing electricity demand in the Americas. Asia is driving robust activity in power.
For example, underlying orders in our Ovation business were up 40% in the quarter.
And we expect the end of year up over 20%.
Customers investing in biomedics and GLP-1 drugs.
The capital cycle remains constructive.
We continue to see new investments replenish projects booked from our $11.2 billion funnel.
Underlying orders in our discrete businesses were up 6% in the third quarter, led by test and measurement, which was up 16%. We saw robust growth across all world areas.
The recovering markets are building momentum.
And we expect underlying orders growth in test and measurement to approach 20% in the fourth quarter.
Supporting double-digit order rates in our discrete businesses as we exit the year.
Emerson has now posted two consecutive quarters of mid single-digit underlying orders growth.
In July, we had a strong start to the fourth quarter, with trailing three-month underlying orders growth of 6%.
As we exit the year, we expect underlying orders growth between 5% and 7%.
Please turn to slide 6.
Our view for full year 2025 underlying sales remains similar.
To what we communicated in the May earnings call.
The demand trends are favorable and support our fourth quarter outlook for underlying sales growth to accelerate to 5% to 6%.
We expect fourth quarter underlying sales for our process and hybrid businesses to be in the mid-single digits, driven by global investment in LG power and life sciences.
Our discrete businesses are expected to be up double digits in the quarter, reinforced by the recovery in test and measurement, which is expected to be up sharply with growth in the high teens.
In the Americas, we expect broad-based strength in the North America MRO and Greenfield projects.
We plan to see growth accelerating in Europe, led by energy, security, and modernization projects, coupled with recovery in discrete markets.
Robust investment is expected to continue in the Middle East.
India and Southeast Asia. We expect China to be up, slightly supported by power in Marine, with improving business fundamentals in test and measurement markets.
We continue to see strength in customer adoption of our subscription software and expect double-digit ACV growth for the full year.
Notably, ACV in Aspen Text Digital Grid Management grew 26% in the third quarter.
Strong momentum across North. America and Europe.
Please turn to slide 7.
The tariff environment continues to be dynamic.
Emerson's annualized gross incremental tariff impact is now approximately $210 million, which is down from our prior estimate of $455 million. Given the recent announcements,
In the fiscal year, we are now expecting our gross tariff impact to be $130 million versus our prior estimate of $245 million.
After a big earnings call, the tariff environment improved as announced tariffs were canceled. Deals were reached with a number of trade partners.
Subsequently, due to the improved tariff environment and in consideration of our customers, we decided to ease a number of the S charges we had in place.
We now expect approximately 115 million dollars of price actions for the fiscal year which equates to 50 basis points of incremental prices.
This is a half-point reduction versus our prior guide.
We have implemented all the price actions.
To completely offset the impact of this exposure.
Now, I'll turn the call over to my doctor.
Thanks a lot.
Third quarter Financial results.
Underlying sales growth was 3%.
Growth was led by our resilient process and hybrid businesses, which were up 3.5 percent.
And our discrete businesses collectively turned positive, up 2% year-over-year.
Price contributed 2.5 points in the quarter, less than previously expected. Due to easing, some surcharges.
Our sales fell short of guidance, driven primarily by this dynamic.
Underlying growth was 7% in the Americas and 2% in Asia and the Middle East and Africa.
While Europe was down 7%.
Software and control grew 2%, and intelligent devices was up 3%.
Backlog increased to $7.76 billion, and our book-to-bill for the quarter was 1.
The sequential backlog was up 2% in both our Process and Hybrid and Discreet businesses.
Adjusted segment, Avadim margin of 27.1%, met expectations. And was negatively impacted by 40 basis points due to tariffs?
Which primarily affected profitability in intelligent devices?
We had strong profit contributions from software and control, including Synergy realization at Aspen Tech and test and measurement.
Operating leverage was 25%, and excluding the impact of tariffs, operating leverage was 38%.
Adjusted earnings per share in the quarter were $1.52, reflecting a 6% year-over-year growth. I will discuss this in more depth on the next chart.
On a year-to-date basis, adjusted earnings per share of $4.38 are up 9%, with strong operational performance contributing an incremental 45 cents.
Finally, Emerson generated better-than-expected free cash flow of $970 million, resulting in a margin of 21.3%.
The cash flow performance was led by higher earnings and improvements in working capital.
Year to date, free cash flow is up 20% versus the prior year and at a margin of 18%.
Please turn to slide 9.
Emerson executed well again in Q3.
Operations added $0.09 versus the prior year, adjusted earnings per share of $1.43.
Software and control added $0.06, and intelligent devices added $0.03.
The Aspen Tech buy-in was slightly accretive in the quarter, driven by synergy realization.
Non-operating items netted to zero as share count and other favorability offset. A $0.02 headwind from FX and a $0.02 headwind from pension.
Overall adjusted EPS increased by 6% year on year to $152.
Please turn to slide 10 for additional details on our fourth quarter and full year 2025 guidance.
We expect fourth quarter underlying sales growth of 5% to 6%, supported by meaningful acceleration and tested measurement. A sustained healthy pace of business in our process and hybrid businesses, along with a strong backlog of position, as we enter the quarter.
And expected incremental tariff-related revenue.
Adjusted segment: Evita is expected to be approximately 27% of 80 basis points. Over the prior year, with operating leverage of approximately 40%.
With this, we expect to land adjusted earnings per share between $1.58 and $1.62, a strong year-over-year growth of 7% to 10%.
For the full year, we expect underlying sales to be up approximately 3.5 percent.
The price is now expected to contribute approximately 2.5 points of growth versus 3 points in the prior guide, due to decreased care of exposure, resulting in lower search charges.
We are increasing adjusted segment EBITDA margin guidance to approximately 27.5% with operating leverage of approximately 70%.
Free cash flow was also increased to approximately $3.2 billion, resulting in a margin of approximately 18%, which includes $200 million of transaction-related headlines.
With that, we will now turn the call over to the operator for Q&A.
At this time, we'll be conducting a question-and-answer session.
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1 moment, please, for our first question.
Thank you. And the first question is from the line of Jeff Sprague with Vertical Research Partners. Please proceed with your question.
Hey, thank you. Good morning, everyone. Good morning, Jeff. Good morning. Hey, I thought you were going with Jeffrey for the AI advisor.
I'm just kidding. Um,
Hey, um, could we just maybe, uh, sort of touch on the margins again and sort of, uh, intelligent devices in particular?
So, um, you know, I kind of get the tariff math, but dollar sales were actually up in the quarter sequentially, and dollar profits were down sequentially. So could we just unpack that a little bit? Were you technically behind on price cost relative to tariffs in the quarter and expecting to catch that up in Q4? Or maybe there's something going on in mix or else otherwise?
Yeah, yeah, uh, thanks for the question about the intelligent devices. You're right, 24.4 and 25, with the adjusted EBITDA on margin down about 1.1 points.
And there was a meaningful impact of tariffs, which we expected. Um, but there was also, uh, a meaningful impact with, uh, with FX included in there, that really wasn't expected that, that drove that down when you take those 2 out, it's up 20 basis points. The other thing to bear in mind is that the tariffs largely hit that group. Um, there there isn't, uh, nearly as much tariffs, um, in control systems and software. So, uh, that that's where you see all of that tariff math reading through, for the, for the most part, there's some in the other but it's primarily there. So the the unexpected piece was the FX which is FX to be clear.
A balance sheet exposure that then gets marked to market, um, and that is in the segment, EBITDA emergence.
Yeah, great. Thanks for clarifying. That. Yeah, I was surprised that effect was a headwind on that bridge. Given you got a translation positive, but the head just working through, uh, understood and um, and then maybe just on test and measurement the inflection that you're seeing there. Um, you know, how would you kind of characterize? Um, you know, vertical markets, that might be driving that as a broad base as a concentrated in a few areas. Um, if there's any Geographic color to add be interested in that also? Yeah, no, I'll comment Jeff and I'll let Ron add as well. No, we saw a very broad base recovery across, all segments, uh, and all World areas, and test and measurement. I'll suggest that the most the most encouraging segment recovery has been in the portfolio business, which is the vast array of, of, of thousands of customers with a diversified, uh, End Market basis and gives us the best indication of, of, of the recovery in the market. Uh, but in addition to that
Aerospace defense continued remain strong uh as it has been uh for a number of quarters now, but the recovering semiconductor and of course, easy comparisons in automotive uh made it possible to have a positive order number across all 4, the segments from. Yeah. And just to add to that, from a, a world area, a region of the world perspective. Asia, being the strongest. They went down first so, they're recovering rebounding. Very strong. China has been actually very good, uh, in terms of recovery as well. Uh, followed by North America and then and and Europe. So I think uh, as Walt said every segment and every World area is strongly positive
That's great to hear. Thanks, I'll leave it there.
Thank you, Jeff.
Next question, from the line of Steve Tusa with JP Morgan. Please receive your questions.
Hi, good morning.
Good morning, Steve.
Um, can you just maybe talk about how you...
A bit of a lower rate, maybe May was weak and June came back. Just maybe some, uh, some color on how these orders trended, uh, in uh, in May and June.
Yeah, you know, we felt strongly about the mid single-digit exit rate that we talked about at the beginning of the quarter. Um and there were some flips and takes as we went through, in terms of timing speed, which you always have on some of the orders, you can see some of it slipped into July, some of it might have been pulled for you. On some just large Capital bookings, what we remain very consistent throughout the quarter was our mro bookings that there was really no fluctuation there, uh, and that gave us a really good basis. And then we had the capital fluctuations come in and out, uh, just based on timing.
Okay, and then just, uh, as we move into next year from a
Kind of software perspective. I was tough to model that um,
Is anything happening next year with regards to the comps at Aspen or anything like that? From a growth perspective, that we should keep in mind?
No, I think, uh, from an Aspen perspective, certainly ACV continues, uh, in terms of high single-digit growth into double digits, uh, as some of the synergies come through. So, uh, you know, nothing, uh, in terms of ACV from an Aspen perspective that is, uh, concerning. And then certainly as it relates to our other businesses, uh, the process segment will remain pretty consistent at mid-single digits with recovering discrete.
Okay, great. Thanks.
Our next question is from the line of Andy Kappa. City, please receive your question.
Hey, good morning, everyone.
Good morning, Andy.
Well, just a little bit more on your core process in hybrid markets. I know you expected mid single disorder growth. That's what you got. Um if you look at the business or or the end markets, you know, you expect stability or or maybe slight Improvement, moving forward. How do you get that? Is it all from power? Now, LG, and maybe you could talk about, you know, some of the weaker markets, what you're seeing like in chemical stabilization there, still getting weaker, how how do you look at it?
Yeah, I know certainly um, LNG power generation and Life Sciences will continue to fuel proper fabric on the Ford basis here given the visibility. We we currently have and we feel very positive about the underlying uh drivers uh, across all 3 of those. Um, chemicals that make story we actually are doing quite well in Specialty Chemicals. Uh, the bulk chemical story is negatively impacted in Europe and in China and we just have a a demand condition and an over capacity condition that impacts those those end markets and and so those are negative uh for us. But but just about uh as I as I look forward into into 2026, certainly I expect the momentum to continue as as capacities invested, not just to meet the energy sector.
Security needs but uh but also to uh to uh, nationalize localized manufacturing of drugs. Um, and of course the the enormous extension we have in in generation and transmission distribution capacity.
Gotcha. And then just back to test and measurement. I know while you've been working on sort of the commercialization of growth there, so maybe you can talk about how much of the improvement is the market's, you know, as you answered Jeff's question, but maybe just your own self-help and where you are in that process of, you know, improving the business. Obviously, you mentioned LabVIEW and the presentation is outperforming. Some of you could talk about that as well. Yeah, I will, and I'll let jump in here as well. Look, um,
So much work has been done Andy as as, you know, by this team uh, led by Robin and we do fabre. And they've done an exceptional job, uh, resetting this company, uh, to address and to, to be a, a quick, uh, more Nimble, uh, uh, responded to to Market opportunities. Um, so certainly we have seen Market recovery underlying Market recovery, which, which fuels, but we believe that we're, we're outperforming the market. And that is, uh, based on not just the reset of the commercial focus in the company but also, in the new products that we're bringing to Market. Uh, and the example, I, I highlighted with lab view is a new generation new.
It relates to the country specific growth plans. They have great exposure, and many, many parts of the world and, and, and going back to the basics and developing go to market plans and growth initiatives, uh, simple things. But, uh, hugely important as the market recovers where our management system deployed is helping and I, uh, grow faster than the market. And that's clearly evident in the pace of business. We're seeing
appreciate it, guys.
The next question is from the line of Scott, Davis, with Millions research, please receive with your question. Hey,
good morning, guys.
Um, want to talk a little bit about Ovation if you don't mind and and just maybe some of this is just going to be re-educating us on, kind of how this, um, how you guys make money there. But when you talk about, like, you know, orders up 40%, you know, is this, is this all new projects is, it is it a mix of retrofit new projects? How do you kind of guys? Think about what goes into a new, does a retrofit, go into a new order for example,
And I got to follow up on that too. Yeah, know certainly. There there are a couple categories there. Um, there's new project, new construction. I highlighted the entry, uh, combined cycle plans, as in as an example. Uh, those typically have long lead times you book you. You do the engineering work construction begins, you start driving the Automation in, um, there are extension of part of life.
Implants. That's a, uh, that's we're seeing that in in combined cycle and coal, uh, any nuclear, uh, in the United States and Asia, and then largely. And then, lastly, they're modernizations where whether it's for cyber security purposes, AI purposes or other, um, plants put in, uh, new control systems and upgrade their Ovation. All 3 of those Scott is, as, you know, uh, bookings. They all have different implications to the ship, uh, ratio given the time it takes to implement and build ra any. And yeah, you said it. I think traditionally the power industry for us has been 1 of competitive displacement, as you know, Greenfield opportunities, uh have really picked up in the in the recent past. But over the years we've owned this. It was a competitive displacement story. But what is uh, certainly in that positive for us, is the Green Field capacity investment in combined cycle happening in the us to fuel the power.
Okay? And are those installs profitable? I mean, how do you do you? Is it more of a loss leader? And then you make money over time on the subscription or, or do you make money on the install as well? We make money on the install, we make more money on the aftermarket. It's the standard formula we've described in the past, I mean, obviously, there's a margin Delta between when we win the project Greenfield and modernization and then ongoing, uh, mro uh, is a very profitable Revenue stream.
Okay, uh, helpful. Thank you, guys, I'll pass it on.
Thank you.
The next question is from the line of Joe Day with Wells Fargo. Let's just see if your questions.
Hi, good morning.
Good morning. You can um Can can you talk through uh control systems and software a little bit? Uh, we saw uh you know, really good organic growth there, uh last quarter. You know, this quarter more in that kind of little mid single digit range, just talk about kind of what you saw within Aspen and and then controls um and and how you're thinking about that growth, uh into the fourth quarter.
Hey hey, you all start this 1. Um,
Yeah, remember, uh, last quarter, we talked about the total deal pulling into Q2, which would have been in, uh, Q3 and Aspen's, uh, Emerson Q3, their Q4, was traditionally their biggest. So we had that, uh, uh, movement. But, you know, underlying Aspen ACB growth and continued Revenue growth, very strong this year. And then the system is business continues, uh, to, to do very well in the mid single digits. And
Um uh continues to see all the Dynamics that uh that law and Ron has talked about.
Associated with the, how Aspen recognizes ASC 606 with the with the with the total, for example, as well as project lumpiness and how we execute within systems and software will have variations from 1 quarter to the next. But overall we feel very, very good about the high end of the, 47 range, for underlying growth in our systems and software business.
Great, that's helpful. Um, and then just a little bit more color on the, uh, discreet side side of the business and kind of contrasting test and measurement with Legacy discreet. Um, you did see, you know, uh, order acceleration there and test and measurement. It looks like discrete orders, maybe pacing more flat-ish and so you know what, what you're seeing in the different demand Trends there and and your expectation for kind of Legacy discrete recovery.
I'll start off in, in Ram, you can have some colors. So, you know, um, there are 2, 2 2, very important dimensions of the Legacy discrete, Joe, uh, that differ from Custom measurement. The first is exposure to automotive and packaging. Uh, businesses particularly in, Western Europe and China. In both of those markets, continue to be relatively depressed and challenging. Um, and that certainly dampened. The, the recovery, their offset, of course, by some of the more traditional broad-based Industrials, uh, which have impacted positive
Lie. But generally speaking and much more muted in your life. Slightly positive as they came out of the quarter. Uh, significantly more muted than the broad-based applications and Market exposures that detect the measurement business has. Yeah. And I think uh, the outside is the uh Market exposure for us in Europe, which has been the the slowest Market to recover for our traditional discreet business or factory automation piece versus uh, test and measurement points to the disparity and and the pace and amplitude of recovery. But uh as long as described I think the automotive segment and then Factory automation, uh, as it relates to Europe and China more muted recovery than many of the markets in testing measurement,
Got it. Thank you.
Our next question is from the line of Andrew open with Bank of America. Please just see a few questions.
Hi, yes. Good morning.
Good morning, Andrew. Uh well, just a broader question. Uh, and good morning to everyone. Just a broad question on your power vertical. Uh, you know, you sort of enter the power cycle with the sort of very material Endowment, in terms of market share, uh the Ovation orders up nicely. Uh, you know, clearly the Aspen grid business uh, is doing very well. What do you think is sustainable growth rate going forward? Can it stay elevated? Uh, for the
Next, uh, I don't know, 12 to 24 months, given what's happening in the power gen industry, broadly.
Yeah. Thanks Andrew. I I'll comment and if Ron will might have something to add. I I certainly believe it can based on the visibility. We have of opportunity across both both markets generation and transmission distribution. Um, and I think it's sustainable in the High Teens kind of range over over the next couple of years. As a matter of fact, we'll probably highlight this market and when we all get together in New York City in November as it goes back to the company because the the, the the the dollar spend that we're seeing and it's not just the US story obviously, is is very meaningful and impactful and as Ron described, it's been a, a significant shift for this team, which had been a as you noted. It's a high participation rate company uh uh to begin with but essentially grew over the last 20 years by by by driving competitive displacement. And now we've refocused the team really around project Pursuit and and um
And expansion of of market. And and so we could we see that momentum. We're very close to our customers because of that very large participation in the business. And we are very optimistic about uh, the next 24 months at high rates of growth. Well yeah. And and
To add to that. Our customer Intimacy in this business is very high and and based on I mean, Bob Jagger who runs this business has great relationships with a lot of the major power companies here in the US. And and, and certainly, I think their plan for continued investment in capacity expansion in combined cycle, and then certainly the, the, the digital group management space on the tnd side supports.
Well, beyond 2 years, but certainly for the next 2 years, we've feel that the funnel is very, very strong on both sides. Both generation as well as transmission and distribution. And so, we expect these type of growth rates to continue.
Excellent. Uh, thanks so much. And and then just looking at where we are in the cycle. I think the narrative from a lot of companies. Uh, back in the spring early summer was that, you know, tariffs are really impacting, uh, the ability of companies to sign off, uh, on large projects, I think with 65% of us trading partners, uh, you know, sort of having some form of agreement with the US.
How has the dialogue with your customers changed? Are you getting more visibility? What is the funnel look like? What's the likelihood of large projects actually? Uh being released into the calendar year and in early 26th thank you.
Yeah, so Andrew around here. Uh, we have an from from, from our perspective, you know, certainly in LG power Life Sciences, which is the majority of our project funnel, that we continue to drive. We have seen no slowdown in decision making or approvals to move projects forward. Um, so I think that's uh, that's the the the most important data point. Now certainly in in, in terms of some of the sustainability projects in our funnel and and that's not necessarily tariff related, we have seen some project
Get cancellations that have impacted the overall size of our funnel, but not in a meaningful fashion. But the most important thing is where we see the growth in LG power, life sciences and certainly even in the US Chemical petrochemical projects and all of the activity in the Middle East.
Uh no slowdown and uh we continue to yield 350 to 4 million dollars of projects wins a quarter from our 11.2 billion funnel that has been consistent with what we've experienced in the last.
Several quarters.
Thank you.
The next question comes from the line of Nigel, Co with wolf research. This is your question.
Uh, thanks. Good morning. And, um, you know, if the points of that, this is not the chat bot. This is the, uh, the real person we have Nigel, you know, we honored you with that. There you go. It's uh it's great. I hope it's going to bridge. Axon.
Um, okay. So um
So look I think that you know, when we you know you've talked about the the order push push out. So I just thought maybe we could just double click into sort of the second half order rates. It looks to be
Mid singles, I think you appointed the high single digit order rates in in the second half of the year. So, just just wondering if you maybe just double click into, where you've seen some of the push-ups, I'm guessing some of the energy transition, uh, projects of, of either canceled, or, or or pushed out, and then maybe talk about the, um, the North American Green Fields. Um,
Clearly power. Um, and, uh, you know, some of the other verticals, he talked about, but I'm just, I'm wondering, are you, are we starting to see some of these reshoring announcements, you know, bearing fruit in terms of orders,
Yeah. So first of all, I I did not talk about order push-ups uh Nigel that was not 1 of the uh elements that we experienced in the quarter. Uh, there were Dynamics around timing of bookings. Some came earlier in the quarter thinking, some came in July, but we didn't see any dimension of push-ups on, on bookings on Capital. Uh, and as I mentioned in, uh, a prior comment, the mro activity in Booking Pace on mro, which is as, you know, 62% of the business was very steady throughout the throughout the quarter. There are many comments on, why don't you comment on the Green Fields? Yeah, I think, uh, the green fields in which is LNG, Green Fields, power Green Field Life Sciences, Green Field, and even activity in chemical and uh, ethylene and methanol continues to be positive for us in North America. So, no, no push outs. No slowdowns there. I think, uh, you may have picked up on the point in terms of our funnel,
We've seen some moves in sustainability and decarbonization projects in the funnel but these are not in the quarter or near-term type projects so that was maybe the commentary you picked up but in terms of Greenfield activity, uh we stayed very very uh positive on on the movement of these projects in North America.
Customers. So that's the first part of my second question. And this just maybe touches on this FX pinch to margins. Do you think that's going to be a factor in Q4 as well?
Uh, I'll take the second part of that. Nigel, we are not planning.
Or the FX pinch on margins in the fourth quarter.
Yeah, and in terms of the discrete markets, I mean, for us, obviously the custom measurement, uh, growth rates, uh, certainly drove a majority of the discrete recovery in terms of momentum. And, and, and certainly many more markets within test and measurement is is an inflection. For example, our largest single Market is is Aerospace and defense and that will see. And, and as for the recent announcement continued momentum and spending, uh, across the globe certainly in Europe and North America, where we have the best presence. So certainly that's an inflection, semiconductors both RF and mixed signal, which is where we play there'll be uh validation investment R&D investment as well as capacity investment. And then the broad-based tnmm recovery is more a sign of markets, getting more confident about the pace of Investments and our Distributors and integrators restocking on knee. So, uh, yeah, I would say many parts of our discreet Market have inflection.
Points and sustained recovery. Um but certainly the ones who are watching our Factory automation Investments out of Germany and China where we haven't seen sustained inflection yet.
That's great. Thank you.
The next question is from the line of Dean Dre, with RBC Capital markets, please just share with your questions.
Thank you. Good morning everyone.
Good morning, Dean.
Hey, when we were at the Emerson Exchange in San Antonio we saw that demo of Ovation Ai and just remind us. Is this still in beta test? Has it been launched? And it was interesting the first application I guess. It's not surprising. It's powered Jen. What's the plan for the roll out for other applications?
Yeah, no, it's um, I noted that on slide 3, Dean, that Ovation, uh, Virtual Advisor has been launched and it's integrated Innovation 4.0.
So, that's not in the marketplace and we're we're, we're it's off to a very good looking start already. I give an example, so the energy uh which is building 2 combined cycle, uh, 754 megawatt, power plants, uh, Mississippi and Texas, and they're using the technology. So there's a really good customer adoption there. Already on that product that you saw as a demo.
Good to hear. And then in your queue this morning, there's a reference to the 1 big, beautiful Bill. Uh talking about the accelerated depreciation that you're saying it would not be a meaningful impact for Emerson. Uh could you just clarify? Is that a reference to your own capex and what about customer capex? You know with all this reassuring? Uh there could be some benefit there if you just clarify uh you are correct. That is a reference to to ours and you're also correct that. It certainly could be a benefit to our customers as they think about about capex.
And just to expand on that a little bit, uh, the provisions of the 1 being beautiful. Bill are generally favorable for Emerson, uh, avoiding some downsides that were in the Outlook, uh, as part of tcja, um, and changing some rates there, that that will be helpful modestly helpful as we move forward.
Thank you.
Thank you. Our final question is from the line of Nicole. De bless with Deutsche Bank. Please just do with your questions.
Yeah, thanks. Good morning, guys.
Good morning.
I just wanted to ask about the order outlook for Q4. I think previously it was up high singles. Now we're looking at 5% to 7% growth. Was that driven by a revision in the factory? Automation outlook? Can you guys just elaborate a bit there?
Single. I, I don't know, I need to find it Nicole, but uh, it still Falls in that band of expectation that we have.
Okay, understood. Yeah, that's fair. Um, and then just follow up on the margin outlook for 4q. I think you guys said about 27% ebit a margins. Usually margins, step down a little bit sequentially. In the fourth quarter is the Divergence versus normal seasonality. Just driven by the moving pieces, around tariffs.
Yeah, I think uh, for us in the fourth quarter um as of if you're talking versus Q3 the fact that we're holding at, that 27% clearly is an indication of tariffs related pricing getting more favorable in the fourth quarter versus the third quarter. We always planned it that way, that we would, we would implement the pricing actions in Q3 we have a little bit of a headwind as it relates to them, uh, fully offsetting tariffs, but then we'll get totally green as we call it into Q4. And hence, uh, Q4 margins, very solid up 80 basis points year-over-year and sequentially flat to Q3
Thank you. I'll pass it on.
Thank you at this time, this will conclude our question and answer session and also conclude today's teleconference. You may disconnect your lines at this time we thank you for your participation and have a wonderful day.