Emerson sees slower 2007 order growth

NEW YORK (Reuters) - A slowing U.S. economy will translate into slower order growth next year at Emerson Electric Co. (EMR.N: Quote, Profile, Research, Stock Buzz), the diversified manufacturer's chief executive, David Farr, said on Wednesday.

But the company expects strong second-half earnings this year, despite tough comparisons to last year, and predicts sales in the current quarter will top $5 billion, Farr said.

"We're going to do our first $5 billion quarter this quarter," Farr said.

Emerson, which each month reports order trends for its five main businesses, has reported higher orders for 41 consecutive months, with double-digit order growth over the past eight months.

"Soon it will probably be nine," Farr said at the Reuters Manufacturing and Transportation Summit in New York.

But underlying growth rates, which exclude impact from foreign currency movements, will slow by the end of 2006, he predicted.

"I would say you're going to see things stepping down a little bit," Farr said. "You're going to see us move down into that 8-9 percent range; next step will be in the 5-6 percent range."

Farr cited a slowdown in consumer spending and rising interest rates.

"By the end of this calendar year, we'll be going high-single digits underlying growth rates based on what I see economically happening," Farr told the Summit.

"The economy clearly is slowing down."

Fed Chairman Ben Bernanke could exacerbate the economic slowdown if he continues to drive interest rates higher to combat inflation. But that "wild card" scenario was not likely to play out, Farr added.

Other areas of concern include the weakening U.S. dollar, which could cut short an economic recovery in Europe. ID:N17228165. He also pointed to high commodity prices and to political turmoil in many parts of the world, which could create an economic jolt and hurt his business.

"I'll roll over in the middle of the night, saying, 'Damn, I hope nothing exploded in Iran,'" said Farr, who marks his 25th anniversary with Emerson this week.

Emerson -- whose products range from technology used by oil and gas producers, to industrial automation systems, heating and cooling systems, and power centers used by telecommunications and computer companies -- has cashed in on booming global demand, which this month lifted its stock to a record high.

On Wednesday, shares were trading at $83.95, down 77 cents, on the New York Stock Exchange.

Asked if the economic slowdown would show up in Emerson's second-half earnings, Farr said: "We should have a very good second half. There's no slowdown in our business based on our current pace of business, nor the order backlog. We're more capital driven, less consumer driven."  Continued...