Emerson Electric: Timing On This One Is Everything

Emerson Electric (EMR) is well positioned for growth in 2012 with global sales. Expecting an (8% to 12%) growth rate, it is a good company to look at. For income investors, it is a very reliable stock. For those thinking about investing in it, we believe timing is everything. Based upon what we are seeing in the stock's movement we'll give advice on how to time an entry into the stock in this article.

Emerson Electric Co. operates as a diversified technology company worldwide. It engages in designing and supplying products and technology, and delivering engineering services and solutions to industrial, commercial, and consumer markets. The company's Process Management segment offers customers products and technology, and engineering and project management services for precision measurement, control, monitoring, and asset optimization of oil and gas reservoirs and power generating plants, as well as for the food and beverage, pulp and paper, pharmaceutical, and municipal water supply industries.

Positioned for Growth in 2012

EMR looks strong in the future and particularly inviting as a long term investment income stock. One thing it has going for it is its global sales strategy. In 2011 its "emerging markets" sales grew by 15% and ended up being 35% of total sales. International sales now count for 59% of its total sales. What makes this strategy unique for future growth is that most of it comes from Asia and not Europe. For 2012, the uncertainty in Europe will not be a major factor in the success of the company as it moves forward.

2012 is expected to bring mild growth to the U.S. market and better growth to the emerging markets. Based on current economic conditions, its outlook for 2012 is:

• Underlying sales and orders increasing 5 to 7 percent
• Reported sales growth of 4 to 6 percent
• Operating profit margin approximately 18 percent and pretax margin approximately 15.5 percent
• Earnings per share growth of 8 to 12 percent

If you are looking for a good, long-term income producing company, EMR is as good as they come. CEO David Farr announced at the last 4thquarter and 2011 yearly report of another dividend increase.

"Consistent with our continuing commitment to Emerson shareholders, fiscal 2011 marked Emerson's 55th consecutive annual dividend increase … Returning cash to our shareholders through dividends remains a core aspect of our value creation strategy. We are committed to returning 50 to 60 percent of operating cash flow to our shareholders, with dividends representing 40 to 45 percent of annual free cash flow."

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When should you invest in Emerson?

Watch EMR closely if you are ready to invest it as a long-term income stock. We are not ready to refer people to it yet because of the chart pattern we see. There is a potential long-term reversal pattern taking place that we do not want investors to be caught in.

The stock looks like it has formed a long-term Head and Shoulders reversal pattern on the weekly charts. The head and shoulders pattern is generally regarded as a reversal pattern and it is most often seen in up trends, where it is also very reliable. The pattern is complete when the market breaks the neckline where volume should also break out.

We suggest watching the stock. Presently it is in a down trend. If it breaks through the neckline of 41.5 on increased volume, there is a good chance it will continue down between (27.5- 32) before it forms a base. If this is the case, wait until a base is formed before entering. If the stock does not follow through on the reversal pattern but continues up, we see it as a good investment right now for long-term income.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.