Emerson Electric's fiscal 2026 gross profit rose in every quarter, climbing from $2.31 billion in the first quarter to $2.74 billion in the fourth. Gross margin did not follow the same path. The company's full-year margin of 53.4%, which it reported in the MD&A of its 10-K for the year ended September 30, 2026, was helped by a one-time item, and the fourth quarter's margin came in below the third. The earnings line tells a steadier story, with quarterly net income rising through the year.
Gross profit rose each quarter
Using the quarterly figures in the company's filings, gross profit and the margin it implies were as follows. Margins are derived here by dividing reported gross profit by reported net sales for each period.
| Quarter | Net sales | Cost of goods sold | Gross profit | Derived gross margin | Net income | Diluted EPS |
|---|---|---|---|---|---|---|
| Q1 (Dec. 31, 2025) | 4,346 | 2,035 | 2,311 | 53.2% | 607 | $1.08 |
| Q2 (Mar. 31, 2026) | 4,562 | 2,140 | 2,422 | 53.1% | 620 | $1.10 |
| Q3 (June 30, 2026) | 4,873 | 2,218 | 2,655 | 54.5% | 720 | $1.28 |
| Q4 (Sept. 30, 2026) | 5,201 | 2,461 | 2,740 | 52.7% | 744 | $1.33 |
| Fiscal 2026 | 18,982 | 8,854 | 10,128 | 53.4% | 2,691 | $4.79 |
Gross profit in the fourth quarter was about 19% above the first quarter. Net sales over the same stretch rose by a similar proportion, which is why the margin held close to 53% for most of the year. The third quarter was the high point for margin at 54.5%. The fourth quarter then slipped to 52.7%, because sales grew faster than gross profit between the third and fourth quarters. Gross profit rose by roughly 3% from the third quarter to the fourth, while sales rose by roughly 7%.
What the full-year margin includes
The company's MD&A states that gross margin reached 53.4% for the year, up 0.6 percentage points. It attributes the improvement to price net of material inflation and to $121 million of tariff refunds under the International Emergency Economic Powers Act. Without that refund, the margin improvement would have been smaller. The company's filing summary does not present a gross margin excluding the refund, so readers should treat the 53.4% figure as including a benefit that the company described as a discrete item.
Below gross profit, the company reported that selling, general and administrative expense fell to 27.9% of sales, which it credited to cost savings and operating leverage. Research and development expense for the year was $812 million, according to the company's income statement data.
Earnings momentum
Net income rose in each quarter, from $607 million in the first quarter to $744 million in the fourth, and totaled $2.69 billion for the year. Diluted earnings per share were $4.79 for the year, which the company reported as up 20% from the prior year. Quarterly diluted EPS moved from $1.08 to $1.10 to $1.28 to $1.33.
The company also reports adjusted diluted EPS, which it put at $6.59 for the year, up 10%. The gap between the GAAP figure and the adjusted figure is wide, and the company's filing attributes parts of the difference to items such as intangibles amortization. Readers comparing the two should review the reconciliation in the 10-K rather than rely on either number alone.
The company also changed its accounting for pension and other postretirement benefit actuarial gains and losses, which now flow through earnings on a mark-to-market basis. Prior periods were recast. The company said the effect is excluded from adjusted EPS. Because of this change, year-over-year comparisons should be read against the recast figures.
Higher interest expense tied to financing related to AspenTech was a headwind, according to the MD&A.
Cash flow and balance sheet
In its 10-K, the company reported operating cash flow from continuing operations of $4.0 billion, up 8%, and free cash flow of $3.5 billion. It paid $1.24 billion in dividends and repurchased $1.0 billion of shares. Total debt fell to $12.2 billion from $13.1 billion, and the total debt-to-capital ratio improved to 37.0% from 39.3%. The company said no borrowings had been made under its revolving backup credit facilities.
Operating working capital rose to 11.9% of sales from 11.3%, driven by higher inventory. Working capital absorbed cash that would otherwise have gone to debt reduction or buybacks, so the trend bears watching in future filings.
Company outlook and the open questions
For fiscal 2027, the company's MD&A says management expects sales growth of about 5%, GAAP diluted EPS of about $5.70, and adjusted EPS of about $7.25. The company also cited international softness, with destination sales in China down 7% for the year, and a drag on underlying sales from the timing of software renewals and the Middle East conflict.
The central question for the coming year is whether gross margin can hold near 53% without the tariff refund. The fourth-quarter margin of 52.7% is the most recent data point, and it sits below the third quarter's 54.5%. Gross profit dollars are still growing, and the company's guidance implies continued top-line growth, but the margin path between quarters is less consistent than the dollar path. Readers should weigh how much of the fiscal 2026 improvement reflects durable pricing and cost discipline, and how much reflects the refund, using the company's future quarterly filings as the record.