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Emerson Electric Co (NYSE:EMR)
Q2 2021 Earnings Call
May 5, 2021, 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Emerson Second Quarter 2021 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Pete Lilly, Head of Investor Relations. Please go ahead, sir.

Pete Lilly -- Director of Investor Relations

Good morning and thank you for joining us for Emerson's second quarter earnings and conference call. Today, I'm joined by President and Chief Executive Officer, Lal Karsanbhai; Senior Executive Vice President and Chief Financial Officer, Frank Dellaquila; and Executive Vice President and Chief Operating Officer, Ram Krishnan. I encourage you to follow along the discussion with the accompanying slide presentation, which is available on our website. Please join me on Slide two. As always, this presentation may include some forward-looking statements, which contain a degree of business risk and uncertainty.

Turning to Slide three. I'd like to briefly highlight that Emerson has been publishing a corporate social responsibility report for many years now. We have renamed the report The Emerson Environmental, Social and Governance Report and are excited to highlight all of the goals, momentum and global standards that our organization is working toward. In particular, our environmental sustainability framework, greening of Emerson, by Emerson and with Emerson, captures our internal sustainability efforts, our enablement of our customer sustainability journeys through our products and solutions and our collaboration efforts with various sustainability stakeholders. I encourage you to review the document next month when it is published. As always, I'm available for questions.

Please turn to Slide four. I'd like to briefly mention our recent Emerson Exchange Virtual Series, which took place from November through March. Emerson Exchange is a chance for our customer base to interact with other users, industry experts and Emerson technology leaders. Despite the obvious in-person limitations of the pandemic, Emerson had a tremendously successful virtual engagement with customers, focusing on digital transformation, sustainability, technology and many other topics.

This virtual framework dramatically expanded the reach of this already very popular user event. Due to the success of the hybrid format, we will likely be adopting such a format going forward. More details to follow as the time and place for the next Emerson Exchange event is finalized.

Please turn to Slide five, and I will now turn the call over to Lal Karsanbhai for opening remarks. Over to you, Lal.

Lal Karsanbhai -- Chief Executive Officer and President

Thank you, Pete, and good morning, everyone. I would like to say a few things before passing it on to Frank. Firstly, to our global team, three things. Thank you for a tremendous quarter. This was one that was delivered based on strong execution, which required agility and creativity as we jumped over a number of hurdles over the last three months. The result was top-class profit leverage over 40% across our operations, well done by everyone. Momentum is building, and it's more broadly today and across a large number of our markets than it was three months ago.

This expansion across both platforms, now as the cycle expands, will enable us to make critical technology investments, building on our strong differentiation and customer relevance. Lastly, to the teams, thank you for welcoming me during my first 90 days, and thank you for your energy and passion. You energize me every day in the journey and on the journey that we're taking together. Secondly, I would like to recognize David Farr, who stepped -- whose Board service concluded today after more than 20 years. Thank you, David, for your many contributions.

And last but not least, I would like to extend a warm welcome to Jim Turley, elected by the Board of Directors yesterday to be Emerson's new non-executive chair. Jim is a highly qualified independent director who is extremely passionate about people, culture and the future of Emerson. I look forward to working alongside Jim and our entire Board.

Frank, over to you.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Thank you, Lal. Good morning, everybody, and thank you for joining us today. We had a strong quarter, and I'd like to take you through the highlights of that over the next several slides. The strengthening recovery that Lal referred to in most of our end markets, combined with the benefits from our cost reset actions, drove strong operating performance and strong financial results in the second quarter. Adjusted EPS for the quarter was $0.97, ahead of our guidance midpoint of $0.89 and representing 9% growth versus the prior year.

Demand strengthened significantly with sales ahead of expectations at 2% underlying growth and March orders toward the high end of expectations at 4% underlying growth. Within that growth number for the orders, significantly, Automation Solutions continues its steady improvement in both orders and sales, while Commercial & Residential Solutions continues to experience robust demand across all its lines of business and in all geographies with 11% sales growth and 21% orders growth for the trailing three months through March.

The cost reset benefits for the program that we implemented almost two years ago are being realized as planned, driving adjusted segment EBIT growth of 15% and 150 basis points of increased margin to 19.1%. Additionally, cash flow continues to be strong, up 37% year-over-year with free cash flow up nearly 50%. This represents 125% conversion of net earnings. We continue to execute on the remaining elements of our cost reset actions. With the bulk of it behind us at this point, we initiated $21 million of additional restructuring in the quarter.

Please turn to the next slide, if you would, for comments on the EPS, the EPS bridge. Operational performance was very strong in the quarter, adding $0.14 to adjusted EPS. As we guided in February, stock compensation was a significant headwind in the quarter due to the mark-to-market impact, which was caused by the difference in the share price at the end of last year's second quarter and this year's second quarter. Of course, you'll recall that last year, share prices in general were all severely depressed with the onset of COVID and we closed last year's second quarter at $48 versus $90 this year.

And that headwind was within $0.01 of the guidance that we gave you in February. Tax, currency and other miscellaneous items netted to about $0.04 of tailwind and a small impact from share repurchase. So in total, again, adjusted EPS was $0.97 versus the guide of $0.89. Please go to the next slide for comments on the P&L. So as I mentioned, underlying sales growth exceeded expectations at 2% and it was 6% on a reported basis, including acquisitions and currency.

Gross profit slipped just a bit, 10 basis points, mainly due to business mix, given the growth in our Commercial & Residential Solutions business. SG&A increased by 10 basis points, but the real story here is that excluding the stock compensation impact, operationally, it was down 220 basis points, indicative of the magnitude of the cost reduction activity and the flow-through of the benefits. We had very strong leverage on SG&A, and the spend was actually down year-over-year when you exclude the impact of the stock comp.

Adjusted EBIT margin was 18.2%, and our effective tax rate was within one point of last year. Share count at 603 million. And again, adjusted EPS at $0.97. If you please turn to the next slide, we'll talk about earnings and cash flow. Adjusted segment EBIT increased 15% with the margin increasing 150 basis points to 19.1%, as I said earlier. Leverage on the volume and cost reset benefits offset the material cost headwinds that we did see in the quarter.

Again, stock comp was nearly a $100 million headwind. It was partially offset by some other corporate items. Adjusted pre-tax earnings were down 20 basis points to 17.3%, again, as the impact of the mark-to-market on the stock comp [Indecipherable]. Operating cash flow was very strong, almost a record again at $807 million, up 37%. Free cash flow at $707 million was up 48%, driven by the strong earnings and favorable balance sheet items. Lastly, trade working capital was down to 16.8% of sales as the impact and the distortions from the COVID-related volume decline are beginning to normalize and as the businesses do a good job managing inventory as we return to growth.

Please turn to the next slide, we'll go through Automation Solutions. Orders continue to turn upward here. We were at negative 5% on a trailing three-month basis, making good progress, and we're on the trajectory that we have been mapping out for several months. Underlying sales were above expectations at negative 2%, and we're encouraged to see the continued sequential improvement in order rates underpinning the sales. China was very strong, and they were favorable comps, but also due to good strength in discrete, chemical and energy markets. Our demand in North America improved sequentially, but it did lag other world areas.

However, there are noteworthy pockets of growth, very encouraging signs in both discrete, life science, food and beverage and power generation. Importantly, we also continue to see increasing KOB3 activity across our process automation customer base, driven by increased STOs and focused spend on opex and productivity. Margin in the platform increased 180 basis points of adjusted EBIT, 230 basis points at adjusted EBITDA driven by the cost reset savings. The OSI integration continues to go well.

The expected synergies are being realized, and we are increasingly encouraged in validating the case that we made for the acquisition when we did it last October. Backlog is roughly flat sequentially at $5.3 billion, but it is up 14% year-to-date. Please turn to the next slide, where we review Commercial & Residential Solutions. The story here is very, very strong growth. Orders continue to strengthen with the March underlying trailing three-month rate at 21%. The demand is primarily driven by ongoing strength in residential end markets, but significantly cold chain, professional tools and other commercial and industrial markets are also picking up and contributing to the growth.

All businesses in all regions were positive, indicative of the trend. Strong growth in China, over 50%, was attributable to commercial HVAC and cold chain demand in addition to the favorable comp. Europe grew 9% on the strength of continued demand for heat pumps and other energy-efficient sustainable solutions. Margins improved 40 basis points at the adjusted EBIT level. Cost reduction benefits were somewhat offset by price/cost headwinds, which we'll discuss a little more when we cover the guidance. Commercial & Residential backlog has increased almost 60% year-to-date to about $1 billion. This is about $400 million above what we would consider normal for this business.

Operations are working through the significant challenges to meet strong customer demand across most of the businesses in this platform. Please go to the next slide, and we'll talk about the updated guidance for the year. Based on the strength we see in orders, the increasing pace of business, we are very encouraged and we are improving our sales outlook for the year. We now expect underlying sales in the range of 3% to 6% overall, with Automation Solutions roughly flat and Commercial & Residential up in the 12% to 14% range. The stronger volume will drive improved profitability.

We now expect 17.5% adjusted EBIT margin for the entire enterprise. Cash flow was also projected higher at $3.3 billion operating cash flow and $2.7 billion of free cash flow, an increase of $150 million. Our tax, capital spending, dividend, share repurchase assumptions remain as they were. We're raising adjusted EPS guidance by $0.20 at the midpoint from $3.70 to $3.90, and we're tightening the range to plus or minus $0.05 from plus or minus $0.10.

We're doing this, increasing the guidance in the face of additional headwinds to profitability, because we're very encouraged by the underlying strength of the business and the read-through of the cost reset actions that the business has been working very diligently now for almost two years. The additional headwinds, you can see in the margin there on the right of the slide, mainly $50 million more of unfavorable price/cost, driven by continuing increases in raw materials costs and about another $20 million of stock comp expense versus what we estimated back in February.

The speed and the magnitude of the price increases in key inputs, steel, copper, plastic resins is unprecedented. Operations are actively and effectively working to mitigate the margin impact through selected price and cost containment actions, and the good work that they're doing gives us the confidence to raise the guidance despite these increased headwinds. On the plus side, we expect to retain about $10 million more in the year of the COVID-related savings than we previously estimated as basic activity like travel and everything that goes with it comes back in more slowly than we would have thought a couple of months ago.

If you please go to the next slide, I'll give you an update on orders. So as I mentioned earlier, our underlying trailing three-month orders turned positive in the month of March at 4%. This is consistent with the upper range of the guidance that we provided to you in February. It's driven by ongoing strength in Commercial & Residential Solutions, as you can see, at 21%, and continued significant improvement in Automation Solutions as our global markets recover. And increasingly, we see improvement in our traditional process industries as well in North America.

We expect general demand to remain strong for the balance of the year. We expect the Automation Solutions markets to accelerate through the second half and the Commercial & Residential HVAC demand will go up somewhat later in the year, but we would expect to see some of the other end markets, commercial, professional tools and such, recover to partially offset that tapering off in Commercial & Residential. So all in all, we believe we have a good outlook for the second half of the year. If you please go to the next slide, the underlying sales growth outlook. Based on what we see and the pace of the improvement in orders, for the second half, we see growth in the high single-digits range at about 7% to 11%, and that will drive the full year growth of 3% to 6%. We expect net sales to be just a bit above $18 billion.

And with that, I'll turn the call back over to Lal and he'll talk about our business and end market outlook in more detail.

Lal Karsanbhai -- Chief Executive Officer and President

Thank you, Frank. I'll just cover a few charts here with the group. Again, increased momentum turning to -- on Chart 15 here. First, on Automation Solutions, we are -- we were led through the recovery in the first half by our discrete and early cycle businesses within the platform. And essentially, what's occurred as we've navigated through the second quarter is a broader recovery in their -- in the mid-cycle elements of this platform.

So we see a return to growth in Q3, which is very positive after five down quarters in this business and continued demand in short cycle as well as the acceleration in the core process automation markets in the back half of the year, yielding a 4% to 8% range in the second half and a flat year guidance on sales. If you turn to Page 16, I'll give you some color on what's going on in the world areas. Perhaps, before I do that though, I'll just paint it from a KOB perspective.

KOB3 has been incredibly strong, both in our discrete spaces, but more interestingly, as we navigated the second quarter into our process spaces. Frank referenced the shutdown turnaround activity, which is up double -- mid-double -- teens for the year and the STO schedules are holding in full, honestly, as we go into the summer, into the fall season, which is very encouraging. The site walk downs are up almost 50% year-over-year, also very encouraging.

And of course, the long-term service agreements are up almost 40% across the world in the business. Very encouraging to see and really provides the fuel for the underlying activity we're seeing in the process space. On a KOB1 basis, things are not completely stopped. There's less activity. Obviously, we digested a significant LNG wave, but there's more activity on the horizon. We've entered the feed stage on two very important projects: the Baltic LNG and the Golden Island BASF in China. Those are important opportunities for us in automation.

And secondly, we were awarded the Sempra Costa Azul LNG project on the Pacific Coast, in the Baja Peninsula of Mexico, which has a significant value for us and was awarded and will be booked here in the third quarter. So there is some activity. We continue to engage on the KOB1. And as that starts to loosen up a little bit, I think we're very well positioned. The tale of the tape, honestly, for the remainder of the year for this business is going to be the Americas. It's going to be a significant swing from a down 16% first half to a second half in that 10% midpoint.

And we'll see that, we saw that already as we entered April, and we'll continue to see that recovery, I think, as we go through the latter half of the year into 2022. Europe, an incredibly strong first half, driven by life sciences, activity around biofuels, the number of KOB2-type project awards, and we continue to see that strength, and I feel confident that, that strength will be there into the second half of the year. Of course, across all of this, the discrete environment has been very, very good into Asia, Europe and in North America, whether it's automotive, medical or semiconductor, and we expect that strength to remain there.

So overall, feeling much better about the second half here and feeling very good about how North America is shaping up for us in automation. Turning to Chart 17, some comments on Commercial & Residential. What a great year this team is having. And obviously, the beneficiaries of a tremendous residential cycle. Much of it was driven by pandemic inventory levels -- pre-pandemic inventory levels, a prebuild in the cooling season that then we also benefited from a secular shift into suburbs and high family home construction and renovation. All of that has led into incredible residential strength through the year. Obviously, my expectation is that it starts to dampen as we get into the latter parts of the fiscal year.

However, the mid-cycle professional tools, cold chain businesses are accelerating, and that's what we see here in this very balanced perspective for this business throughout 2021, and I'm very encouraged by what we're seeing in the later cycle pieces. Of course, we -- there's some good underlying technology evolutions as well that will impact the residential, be it the refrigerant changes or the heat pump moves in Europe, which are -- which will continue to drive good growth for the businesses.

And then turning to Page 18. Again, a very balanced picture here from a world area perspective. And overall, a strong second half with the commercial industrial segment of this business continuing to improve as the residential market start to taper, as I discussed. I think all the world areas should grow, again, in the low double-digit to mid-teen range as we go into the second half. In the Americas, we are seeing residential demand remained strong in the near term and the commercial market is really starting to accelerate.

And the cold chain piece, particularly, which is driven by transport and aftermarket, and then we see the tools momentum building in the professional channel. So very encouraged by that. Europe, I mentioned heat pump activity. We expect that to stay strong. And of course, a surge in construction should bolster our plumbing and electrical tools business. And then lastly, in Asia, China is the headline contributor to growth as some of you have already noted, and demand is driven by commercial air conditioning and cold chain solutions.

So with that, Pete, I'll turn it to Page 19, and we'll go to Q&A.

Questions and Answers:

Operator

[Operator Instructions] And the first question will come from John Walsh with Credit Suisse. Please go ahead.

John Walsh -- Credit Suisse -- Analyst

Hi. Good morning, everyone.

Lal Karsanbhai -- Chief Executive Officer and President

Hi, John. Good morning.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Good morning.

John Walsh -- Credit Suisse -- Analyst

Hi. So obviously, a lot of focus will probably be on the Americas recovery. Just wanted to get your perspective in Auto Sols -- kind of how much of this is driven by kind of just run rating the's trends you're seeing in process against an easy compare versus kind of the growth you expect to see in those discrete and hybrid markets there?

Lal Karsanbhai -- Chief Executive Officer and President

Well, we're seeing, John, good acceleration in the underlying process. We went through a period of time, as you'll recall, of break/fix environment with limited site access, with limited STO type of activity. That's flipped. Obviously, the inoculation rates in this country have helped the confidence that customers have in having others on site and having their own folks, very honestly, on site.

That's driven now a level of activity that is incredibly encouraging and is, I think, above and beyond just the simple comparisons that we have. The discrete strength, to your point, will remain. I don't foresee that to wane at least as we go through the year in North America, but the real fuel there will be increased activity. And we're seeing that in the PO rates. We're seeing that in quotation activity and in the daily booking activity in our short to medium cycle automation businesses.

John Walsh -- Credit Suisse -- Analyst

Great. Thank you. And then obviously, you updated your view here on inflationary pressure. Just as we think about the balance of the year, could you talk a little bit about the price/cost equation and if there's kind of any noticeable difference kind of Q3 versus Q4 and any timing of price related to that? Thank you.

Lal Karsanbhai -- Chief Executive Officer and President

Yeah. I'll comment. We -- as Frank noted, we adjusted our guide there from the $25 million headwind to $75 million, again, within the construct of what we believe we can guide the overall EPS. The teams are doing a fabulous job, and particularly around the headwinds of plastic resins, copper and steel, which have been challenging for us. I would expect, as capacity comes online, John, that there's a little bit of relief on price/cost. But again, that's a wait and see. So we took a more conservative approach there based on what we're seeing in the market as we've discussed with the teams.

Ram, any comments there?

Ram Krishnan -- Executive Vice President and Chief Operating Officer

Yeah. I think we do expect the bulk of the impact, frankly, in Q3 and Q4. We didn't see much of an impact in the first half as we work down inventory, but the impact of steel and copper and resin will see in the second half. But as Lal mentioned, we do expect, particularly in steel capacity, to come back online. Certainly, our pricing on steel in China is better than what we see in North America. So hopefully, as we get into the later part of the year, we'll start that -- seeing that steel pricing soften a little bit. So that's kind of what's built into the plan.

John Walsh -- Credit Suisse -- Analyst

Great. [Indecipherable]. Thank you.

Lal Karsanbhai -- Chief Executive Officer and President

Thanks, John.

Operator

The next question will come from Nicole DeBlase with Deutsche Bank.

Nicole DeBlase -- Deutsche Bank -- Analyst

Hi. Good morning, guys.

Lal Karsanbhai -- Chief Executive Officer and President

Hi, Nicloe.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Hi, Nicole.

Nicole DeBlase -- Deutsche Bank -- Analyst

So maybe we could talk a little bit about what's going on with respect to supply chain, obviously, a really hot issue this quarter. So if you guys could talk about what you're seeing and to what extent that could be, I guess, a cap to upside to revenues in the second half.

Ram Krishnan -- Executive Vice President and Chief Operating Officer

Yes. So certainly, a lot of press on supply chain, obviously, in terms of inflation, but also availability and shorter challenges. For example, you probably heard the electronics challenges on chip shortages. Frankly, our global teams, I would say, at this point, have done a remarkable job from an availability standpoint, whether it's availability of steel, plastic resin where we've been able to move to alternatives. Certainly, on the electronics front, we've managed through our supply in terms of electronics supply from Asia pretty well.

The inflation side, we're managing through that. I think that is something through price and productivity programs we're addressing. But to this point, we haven't seen any availability challenges. And similarly, on the logistics front, whether it's ground, ocean freight or air freight, our teams have done a really good job locking in the needed capacity to bring in material from our overseas supply chains. And frankly, at preferred rates, we haven't had to go out into the spot market yet, which is where we're seeing a lot of that inflation.

So, so far, I would say we're managing through it pretty well. And the other piece I would want to point out is our regionalization strategy where we really have regional supply chains supporting our business has been a significant benefit where we haven't had to rely significantly on overseas supply chains to feed our plants.

Nicole DeBlase -- Deutsche Bank -- Analyst

Got it, thanks. That's really helpful. And then I guess thinking about the cadence of EPS revenue margins in the third quarter versus the fourth quarter, anything you guys want to highlight there? I think usually you give us kind of a sense of what the next quarter's earnings will look like. So just anything you want to provide on 3Q versus 4Q?

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Well, Nicole, this is Frank. I think we're looking at a very, very strong third quarter coming at us just based on the orders that we see and the backlog that we have available to us. So I would say, at this point, as I look at the second half, third quarter will be very strong. The fourth quarter will be good, but a little less visibility into the fourth. So that's kind of how we see it right now. Maybe it's a tad front-loaded toward the third quarter.

Operator

The next question will come from Nigel Coe with Wolfe Research.

Nigel Coe -- Wolfe Research -- Analyst

Thanks. Good morning. Very different feel to the call today. Good to hear Frank's voice.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Thank you, Nigel.

Nigel Coe -- Wolfe Research -- Analyst

So on Comm & Res, the 11% growth, mostly in the fees, have very strong orders, but the growth rates come in a little bit lighter than some of your OEM customers and there's a deceleration from Q-to-Q. It looks like we've got some nice acceleration come into the back half of the year. But just curious how inventory levels look in the channels and whether you saw some destocking happening during Q2. Just curious on that.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Yeah. Thanks, Nigel, good to hear your voice as well. I think there's a dynamic here between residential and commercial, in Comm & Res, across the broad business and that'd be our climate into the tools as well, which is -- has an impact there in terms of growth rate. We're seeing many of our OEM customers who have reported with strong residential growth. Now although we have that, we have a balance in our business between cold chain and NAC. So I think that's where you'd probably see that difference.

Nigel Coe -- Wolfe Research -- Analyst

Great. And a bit of a random question here, Lal, but on the Emerson Exchange, obviously virtual this year. I mean how does that play out going forward? I mean how do you change the sort of the engagement with customers virtually versus obviously in person? And how do you think that evolves going forward?

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Yeah. No, great question, Nigel, and I know you've attended the Exchange. It's a very special event for us in automation, as you know, and we get great customer engagement throughout. We learned a lot. And obviously, we didn't have a choice as we went through an exchange season in the Americas and Europe this year. But I think what we learned is that there's going to be a balance. I think there's going to be a way to engage with folks on the ground. We don't want to get away from that if we have the opportunity to do so.

But we can also reach a much broader base of engagement with customers through the virtual platform. Customers who may not be able to devote a day or a night of travel, who may be interested in a singular subject or keynote, they now have the opportunity to dial in and listen in or see that presentation in a form that works for them. So I think it's going to be a balance. I think some of that engagement is still going to be important because, as you know, as you saw when you were in -- when you were there with us in Nashville, there is a lot of customer-to-customer engagement where the value really comes in from those discussions.

So we don't want to lose that. It's -- but I think we -- in this new construct, I think, can reach a broader base of folks while not losing the original intent of the meeting. So I'm excited about Exchange. I hope we can hold it in the fall. The guys are talking about the fall versus spring right now. We'll see where we land.

Nigel Coe -- Wolfe Research -- Analyst

[Indecipherable]. Best of luck.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Thanks, Nigel.

Operator

The next question will come from Julian Mitchell with Barclays. Please go ahead.

Julian Mitchell -- Barclays -- Analyst

Hi. Good morning.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Good morning.

Julian Mitchell -- Barclays -- Analyst

Morning. Maybe a first question on the margin outlook. You raised the EBIT margin guide to that 17.5% number for the year as a whole. Just wanted to double check sort of as we think about the second half specifically, it seems to imply maybe a sort of mid-20s incremental on the segment level and maybe a little bit lower than that sort of all-in because of the corporate aspects and so on. Just wanted to confirm if that's roughly the right math. And any difference in incremental margins in the second half for the two divisions, AS versus Comm & Res?

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Yeah. I mean, I think that's in the -- you're talking about now the incrementals with leverage. I think that's in the ballpark, Julian. This is Frank. It's in the ballpark. I mean the incrementals, I would expect to be higher in Automation Solutions. We will have to digest the price/cost headwinds in Commercial & Residential, and that will be a headwind for certain on the incrementals. Nonetheless, we're going to deliver good incremental profits in the business, and we will have leverage on those sales. But no doubt that it will hold those incrementals down at least for the next couple of quarters. So I think you would expect to see it to be higher in Automation Solutions than in Comm & Res.

Julian Mitchell -- Barclays -- Analyst

Thanks very much, Frank. And then maybe a broader question around Automation Solutions, the sort of top line outlook and the end market backdrop there. So we saw that the backlog was sort of flattish sequentially, up, I think, mid-single digits year-on-year. How should we think about that Auto Sol backlog trending from here? Understood that maybe big projects are relatively sparse, but maybe the KOB2 stuff picks up. How do we think about that AS backlog, the pace of the pickup from here?

Lal Karsanbhai -- Chief Executive Officer and President

Yeah. Good question. Good question, Julian. I -- so year-over-year, backlog in automation is up 14%, I believe, is the number. Obviously, we went through a significant -- through the first two quarters that suggest in terms of shipping, KOB1 activity we had, particularly in our Final Control and Systems businesses and the fuel of the revenue growth going forward becomes more mid-cycle measurement solutions systems and discrete business.

So consequently, that's more what we'd call book-to-ship within quarter or within quarter-and-a-half. And I wouldn't necessarily expect a significant growth in the backlog, but within the parameters that we're in today. So in that, that suggests 10% to 15% backlog growth. But without the vast KOB1 activity, I don't expect that to grow beyond the rate we're in today.

Julian Mitchell -- Barclays -- Analyst

That's great, thank you.

Operator

The next question will come from Scott Davis with Melius Research. Please go ahead.

Scott Davis -- Melius Research -- Analyst

Hi. Good morning, guys.

Lal Karsanbhai -- Chief Executive Officer and President

Good morning.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Good morning.

Scott Davis -- Melius Research -- Analyst

Encouraging comments you made on April, must have been a pretty darn good month. But I had couple of kind of completely different questions since, Lal, you're relatively new. I mean your compensation structure is a little bit complex for your management team. Is there -- is that one of the things you're working on kind of adjusting early in your tenure here?

Lal Karsanbhai -- Chief Executive Officer and President

Yes. So yes, good to hear from you and thanks. April, I did make the comment in April from an Automation perspective and Commercial & Residential perspective, continues to be on trend to what we have experienced and have expectations around, so I'm encouraged by that. Now in terms of the comp structure, yes, I've spoken openly about the journey we're on in our culture and what we're undertaking here as an organization. I think there's a lot of energy around that across the enterprise.

Compensation is absolutely something that we're looking at. And we actually -- we have a task force in place today led by Lisa Flavin, and she's looking through how we compensate the executive structure and others. And I think there's a lot of opportunity there for us. And we'll be -- we'll take our time. We'll work very closely with the Board on that as we go through the summer, into the fall and hope we have an evolution there as well.

Scott Davis -- Melius Research -- Analyst

Okay. Good. And just as an unrelated follow-up, the heat pump market in Europe, you guys have been talking about for a couple of quarters now. Does your product have technological differentiation? I mean, perhaps you can maybe talk through kind of why you guys think you'll win in the heat pump market?

Lal Karsanbhai -- Chief Executive Officer and President

I think we're very well positioned, obviously, with the strong customer base we've had for a long time. But I think the technology differentiated is really around sound attenuation in the heat pumps and the efficiency. And I think that's where we stand out versus what the marketplace offers, and has been a big part of the growth in what fuels the European opportunity going forward. So we're excited about where the product investments have been and where we can go going forward.

Scott Davis -- Melius Research -- Analyst

Sounds good. Good luck, guys. Thank you.

Lal Karsanbhai -- Chief Executive Officer and President

Thank you.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Thank you.

Operator

The next question will come from Steve Tusa with JPMorgan. Please go ahead.

Steve Tusa -- JPMorgan -- Analyst

Hey, guys. Good morning.

Lal Karsanbhai -- Chief Executive Officer and President

Hey, Steve. Good morning.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Good morning, Steve.

Steve Tusa -- JPMorgan -- Analyst

Strange to be on an Emerson call in the morning. So, thanks. Thanks for that. Usually, we have to wait all day for this. Just looking at your comparison versus 2019, so your sales in the first half are down relative to '19, your EPS is up very comfortably like $0.20-plus. If I just take the back half of '19 on EPS and add it to what you just did in the first half of '21, you're already kind of at the high end of your guidance range. The sales comps year-over-year should be pretty similar, just down moderately versus '19 still.

What's kind of the big headwind in the second half? I know price/cost maybe is like a $0.05 or something like that, I don't know. But it seems like you're growing very strongly over '19 without the benefit of revenue already. But in the back half, you really don't show any material improvement whatsoever versus '19. Maybe you could just like help us with the moving parts there.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Yeah. So Steve, this is Frank. I mean the obvious things in the second half that were not headwinds in '19 or both the price/cost and the stock comp, so between the two of those, you've got $70 million, $75 million of headwind, $0.08 to $0.10, to take your point. But we're waiting to get better visibility into the fourth quarter. At this point, we understand that when you make the comparisons to '19, it's not a big increase over the second half of '19, but we do have some uncertainty to work through as we go through the second half here, and we're going to see how that plays out. We think the guidance raise at this point is prudent, and we're confident we'll get there and then some as we work our way through this.

Steve Tusa -- JPMorgan -- Analyst

And then just on the HVAC side, different players putting up different types of results, all very strong from a customer perspective. I know you guys had like kind of a big end to calendar year last year. What did you see in your kind of U.S. resi kind of core compressor business this quarter roughly?

Lal Karsanbhai -- Chief Executive Officer and President

So Steve, this is Lal. So we had a strong -- we had a very strong quarter in the climate business in the United States. We continue to see quarters accelerate, backlog conversion grew in the mid-single digits -- excuse me, sales grew in the mid-single digits and with the acceleration really occurring, as Frank pointed out, into Q3 for us. And that's where you'll see this really from a U.S. or purely U.S. perspective in HVAC pop for us.

Steve Tusa -- JPMorgan -- Analyst

Right. And then just one quick one. How big is that business now as a percentage of CR&S? I mean historically, everybody kind of thought of you as a U.S. resi play. I mean given you've smashed these businesses together and China remains a big driver and Europe is growing fast, I mean, how big is that kind of core U.S. compressor business now for you guys as a percentage of CR&S?

Lal Karsanbhai -- Chief Executive Officer and President

Yes. It's a sizable business, Steve. We haven't disclosed the size of it relative to the entire platform, but you can assume it's a sizable portion of the entire climate and CRS platform.

Steve Tusa -- JPMorgan -- Analyst

Okay, great. Thanks a lot. Appreciate it.

Lal Karsanbhai -- Chief Executive Officer and President

Thanks, Steve.

Operator

The next question will come from Andrew Obin with Bank of America. Please go ahead.

Andrew Obin -- Bank of America -- Analyst

Yes. Good morning.

Lal Karsanbhai -- Chief Executive Officer and President

Good morning, Andrew.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Good morning.

Andrew Obin -- Bank of America -- Analyst

Just sort of a big picture question. As you talk to your customers in the energy industry, how much -- how set are the budgets into the year? And is there anything that can change them? Is there any sort of reason to think that there could be a potential upside given massively increasing economic activity, given high oil price? Or do we need to wait until next year to sort of see them change their mind?

Lal Karsanbhai -- Chief Executive Officer and President

Good question, Andrew. I think budgets have been set on assumptions around demand in oil price. Having said that, they're significantly skewed toward sustainability efforts. They're skewed toward efficiency and operating elements of the business. And that gives us a good baseline of confidence in the recovery in the market.

Having said that, if we do see more planes in the air, more trucks on the road, broader economic activity, I think we'll see expansions in the budgetary as we go through the second half of the calendar year -- into the second half of the calendar year. And that will prove to be advantageous to the automation business above and beyond where we are set today.

Andrew Obin -- Bank of America -- Analyst

Great. And then another question on Commercial & Residential. As we think about the heat pump business in Europe, you certainly guys have been talking a lot about it. How much visibility -- it seems it's part of sort of longer-term regulatory trend, but how much visibility do you have in this business over the next 12 to 24 months? And is that accretive to the mix, neutral to the mix? How should we think about that? Thank you.

Lal Karsanbhai -- Chief Executive Officer and President

Yes. Go ahead, Ram.

Ram Krishnan -- Executive Vice President and Chief Operating Officer

Yeah. I would say we have very good visibility in Europe as well as the heat pump opportunities in China. But in Europe, our engagement with the OEMs, which play in the space, has been very good. These have been traditional customers of ours. So as it relates to the new technology that Lal referenced in terms of efficiency and sound, our Scroll product line and our complete solutions position for that market, we're in deep engagement with the OEMs. So I would say the visibility is good. And then your question was margin accretive, is that what your question was?

Andrew Obin -- Bank of America -- Analyst

Yes. Is it good for the margin or is it bad for the margin? It's very simple.

Ram Krishnan -- Executive Vice President and Chief Operating Officer

I would say it's neutral. Neutral to slightly accretive to the margins.

Andrew Obin -- Bank of America -- Analyst

Fantastic. Thank you so much.

Lal Karsanbhai -- Chief Executive Officer and President

Thank you.

Operator

The next question will come from Tommy Moll with Stephens. Please go ahead.

Tommy Moll -- Stephens -- Analyst

Good morning. And thanks for taking my question.

Lal Karsanbhai -- Chief Executive Officer and President

Hi, Tom.

Ram Krishnan -- Executive Vice President and Chief Operating Officer

Hi, Tommy.

Tommy Moll -- Stephens -- Analyst

Well, I wanted to talk about the pathway to record margins you referenced in the release and on the call. Comparing to where we were a quarter ago, I'm thinking through the factors that may have changed. So clearly, price costs, even if temporary factors worked against you in the last 90 days, but maybe flow through on some of the cost out execution is at least as good as -- maybe a little bit better than expected. But if you just step back and think about versus a quarter ago, the pathway and the timing and the end point for that record margin progression, what would you highlight for us is the most important things that have shifted?

Lal Karsanbhai -- Chief Executive Officer and President

Yeah. I'll say a couple of words, and I'll let Frank, who actually presented on this subject to the Board yesterday. I feel really good about the path, Tommy. We have a potential acceleration on the path in Automation Solutions with tremendous performance and on the cost. The price/cost that you referenced is predominantly in our -- the challenges are predominantly in our Commercial & Residential business. But what I'll say is that they're on track to deliver that end point peak margin work. So I feel very, very positive, slightly ahead in one platform, on track on the second platform. Frank?

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Yes, Tommy. Lal summarized it well. I mean we did have this conversation yesterday, and we feel very good about the timing that we laid out in February regarding the achievement of the margin targets in 2023. The pickup and the pace of volume in Automation Solutions and the flow-through of the cost reset actions that have been taken in that business basically put us a year ahead of schedule, we believe, in terms of margin improvement there, which really derisks that plan.

And in Commercial & Residential, very significant mitigation actions are being taken to offset the transient -- this temporary price/cost headwind that we're going to have for the next couple three, four quarters. And we are -- we believe strongly that we'll be right back on track to hit those targets as well. So as Lal said, we feel very good based on the levers that we have, even in the face of the unexpected price/cost that we're going to get to the finish line in '23 as we committed.

Tommy Moll -- Stephens -- Analyst

That's very helpful. Thank you both. And if I could follow up with a question on culture. Lal, you're now a few months in. Cultural modernization is clearly a theme that's important to you, but also one that you've made clear is tied to value creation and execution. So what can you provide us for an update there about the vision now that you've had a little bit of time to think through how you're going to approach it?

Lal Karsanbhai -- Chief Executive Officer and President

Yeah. No, I appreciate the question, Tommy. The first thing we -- one of the first things we're doing is we need to measure where we sit today and where we want to go. So we're working with an outside firm to do a cultural assessment of the 58,000 employees, salary employees of Emerson. We've done a pilot to understand how the tool works. We feel comfortable how -- that we understand the tool and we like the tool, so we're going to broaden this out here in the month of May. And what that's going to give us is a very important set of data, understanding where we are and where the population a company wants to go in terms of the culture.

I would suggest that in addition to that, Tom, we've done -- we've taken care of some of the low-hanging fruits, some modernization of work practices. We're working with McKinsey & Company on a diversity inclusion target and goals, which we'll publish as part of the ESG report and after conversations with our Board in June. So there's a lot of activity going on. We're all very energized about the opportunity. And we do believe, honestly, Tommy, at the end of the day, that if we look more like the world where we live and work inside of Emerson, we'll be a better company, we'll perform at a higher rate, and we'll create more value.

Tommy Moll -- Stephens -- Analyst

Thank you, Lal. I'll turn it back.

Lal Karsanbhai -- Chief Executive Officer and President

Thanks, Tommy.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Thanks, Tommy.

Operator

The next question will come from Markus Mittermaier with UBS. Please go ahead.

Markus Mittermaier -- UBS -- Analyst

Hi. Good morning, everyone.

Lal Karsanbhai -- Chief Executive Officer and President

Good morning.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Good morning.

Markus Mittermaier -- UBS -- Analyst

We covered a lot of ground already, but maybe a finer question on price/cost, income rates, if I could. So the way I understood you is that basically, Q1, Q2, you were protected from essentially using inventory. So how should I read the guide to $75 million unfavorable price/cost given that sort of -- is that inclusive of future price rounds that you might be planning? Or is that based on what you've done so far and your best view on inflation to date? Maybe we can start there.

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Okay. So Markus, I mean that incremental $50 million price/cost that we've guided to is predominantly in Commercial & Residential, obviously factored into the guidance. And it's a complicated subject. But I mean with the major OEMs, we have material pass-through clauses, but they're all different and they all operate with varying degrees of lag. So while we're confident the price comes back in, it comes back in over time. Across the rest of the platform, we will take deliberate pricing actions and mitigation actions as well to offset that inside of the guide that we've provided. So that's how we think about it, and that's how it will play out. That's how it's played out historically. This just is a more pronounced increase than we have seen in anybody's memory here.

Markus Mittermaier -- UBS -- Analyst

Okay. Got it. And then maybe a broader question on China. Obviously, easy comps in the past quarter here. How do you see the momentum in both short and long cycle there on the ground? Maybe you could take us on a tour through the various verticals there on China specifically, given that it's quite sizable for you guys. Thank you.

Lal Karsanbhai -- Chief Executive Officer and President

Yeah. Thanks, Markus. I feel good about what we're seeing in China. Obviously, the past quarter was very, very strong across both platforms. We're seeing good activity on the automation side, KOB3-driven, but also project-driven, particularly in the chemicals segment, which is -- should continue through the second half of the year. And then the user comps obviously come on the climate side. But again, encouraging trends there as well, infrastructure, commercial construction driven and cold chain around transport, particularly. So I feel really good about China for the remainder of the year. Teams are very engaged, and I feel positive about what we'll see throughout the fiscal.

Operator

The next question will come from Deane Dray with RBC Capital. Please go ahead.

Jeff Reive -- RBC Capital -- Analyst

Hi, good morning. This is Jeff Reive on for Deane. My question is, I think in your prior guidance, based on WTI prices of $45 to $55 a barrel, so I think we're sitting above that level pretty comfortably now. Maybe how has that changed your thinking? How is that factored into the new guidance? And maybe what are you hearing from customers?

Lal Karsanbhai -- Chief Executive Officer and President

Yes. Thanks, Jeff. Yes, obviously, it's embedded in our thinking and that level of activity that we've baked into Automation Solutions and the increase in the guidance there. We're seeing that being reflected in the spend rates and the activity in the segment, more closer to that $60 number now. But as you can imagine, customers are still relatively skittish as they forecast and we talked about budgets in the past and one of the past questions here, so they're watching it closely. But clearly, as reflected in the increased guidance, feel a little bit stronger about where the WTI ultimately will land for the year.

Jeff Reive -- RBC Capital -- Analyst

Got it. Thanks. And then maybe just another one. Can you talk about the Chairman transition? Was it a conscious decision to separate the Chairman role from the CEO role? And then maybe do you have any update on the timing of a potential CFO transition?

Lal Karsanbhai -- Chief Executive Officer and President

Well, you know, Jeffrey, the CFO is sitting right here with me. I'm very happy that he's here with me and I don't...

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Did Deane tell you to ask that?

Lal Karsanbhai -- Chief Executive Officer and President

No CFO transition in the foreseeable future here. I'm very happy that I have Frank and very blessed to have Frank, very honestly, and his experience, which will be incredibly important for this management team, so nothing there to report. In terms of the Chairman, I honestly -- it was not -- it was highly researched, debated and discussed with the Board. Obviously, feel very comfortable with the separation of role to enable me to operate the company, to learn the governance piece over time, to have mentorship from the Board of Directors, very important. And again, as you think about the early stages of my CEO-ship, that was the right decision. I'm glad the Board supported it, and I think we landed in a really good place.

Jeff Reive -- RBC Capital -- Analyst

Very helpful. Thanks a lot.

Operator

The next question will come from Andy Kaplowitz with Citigroup. Please go ahead.

Andy Kaplowitz -- Citigroup -- Analyst

Good morning, guys. Frank, I'm still very happy you're around. So...

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Thank you, Andy, I appreciate that.

Andy Kaplowitz -- Citigroup -- Analyst

All right. So last quarter in C&RS, I think you were still wondering how your Q4 would look given tougher comparisons in residential and how the professional tools recovery would shake out. Obviously, you've refined your guide for the second half revenue growth. And you sound good about your visibility into Q4 at this stage. But could you give us more color into how you were thinking about the Q4 growth against the more difficult comps? And how that might translate into FY '22 growth and the longer-term revenue growth guidance that you gave at the Analyst Day for C&RS of 5% to 7%?

Lal Karsanbhai -- Chief Executive Officer and President

I'll comment on it. I will -- I feel good because of the cross-section in the cycles, right? The early cycle residential, I think we'll all agree it's going to taper off, whether that tapers in Q4 or into Q1, but it will taper off. It's been incredibly hot now for a number of quarters. But the good news is the balance that, that platform has in terms of not just in the climate side with cold chain, which is accelerating as we'll go into Q3 and Q4, but also on the professional tools side, which will balance off the consumer tool businesses, which have benefited from do-it-yourself and big star growth. So the balance is incredibly strong. It gives me, at this point, at least confidence heading into the latter half of this year and honestly, into a balanced perspective into '22.

Andy Kaplowitz -- Citigroup -- Analyst

That's helpful, Lal. And I'm sure you guys don't want to update us on the funnel every quarter, but let me ask you about it in this sense. So you had mentioned $6.5 billion in your funnel. I think you had mentioned $1.6 billion for electrification funnel. So maybe it's a good time to talk to us about an update on OSI. But also, in terms of the funnel, obviously, KOB1 activity perking up a little bit, are you seeing new projects enter the funnel? Or is it really some of these old projects maybe starting to move a little bit?

Lal Karsanbhai -- Chief Executive Officer and President

A little bit of both. Obviously, the two feed stages on Baltic and Golden Island, there are things that have been talked about and debated and discussed for a long time. And so those are starting to move forward, so that's that element. But something like the Sempra is obviously, in terms of -- it's relatively new. We didn't know whether it was going to move forward or as part of that significant eighth job LNG wave, now this is the ninth job, so very important to see that.

In terms of what's new in the funnel, it's still in that $6.4 billion range. The hydrogen-related element in addition to that would be about $1 billion. The electrification piece, as you said, about $1.5 billion, $1.6 billion. There's some newer stuff in there, but it's relatively smaller, biofuels, conversions of existing facilities or modernizations that fall into the funnel. So it's relatively static, although it is encouraging as you point out, to see some things moving to the left. Now in terms of OSI, phenomenal first six months with us ahead of plan that we put together internally and presented to our Board.

I feel great about the management team and what they're accomplishing. And more interestingly, I feel really good about the opportunity to continue to invest in the business and expand the sandbox. I think it's a very unique opportunity for us in terms of both technology and end market diversification. We want to do both. We want to do more, both organically and if available inorganically.

Andy Kaplowitz -- Citigroup -- Analyst

Appreciate it, guys.

Lal Karsanbhai -- Chief Executive Officer and President

Thanks.

Operator

The next question will come from Gautam Khanna with Cowen. Please go ahead.

Lal Karsanbhai -- Chief Executive Officer and President

Hey, Gautam. How are you doing?

Gautam Khanna -- Cowen -- Analyst

Thank you very much.

Lal Karsanbhai -- Chief Executive Officer and President

[Technical Issues]

Gautam Khanna -- Cowen -- Analyst

So a couple of questions. First, in the quarter, what was the mix of KOB3 and Auto Sol? And what are you guys expecting in the second half with respect to KOB3 versus the other two?

Lal Karsanbhai -- Chief Executive Officer and President

So first -- second quarter, first half stayed relatively consistent at 59% on KOB3. And very honestly, I expect that to stay within that 59% to 60% range as we go through the second half of the year. It's a very strong mix, obviously, for us. But that's kind of where I see it, Gautam, as we go into the second half.

Gautam Khanna -- Cowen -- Analyst

Okay. In your opening remarks, you talked about turnaround backlog being pretty strong, visibility there being strong. Anything you're seeing with respect to scope of turnaround that's different than you would normally see in a cyclical recovery? Any sort of change in customer buying behavior that's noteworthy?

Lal Karsanbhai -- Chief Executive Officer and President

Yeah. No, interestingly enough, so what we saw, particularly in the upgrade turnaround environment as we went through COVID was that the systems upgrades, for the most part, continued. And the reason they continued is because of the ability to perform a lot of that work virtually and remotely. We have tremendous capabilities in our DeltaV business to do that, in our Ovation business to do that, and that activity continued as system upgrades were performed around the world.

What we're most -- what was mostly impacted was the stuff that hangs on pipes or on vessels, the valves, the transmitters, the flow equipment in which we're now seeing the acceleration. And honestly, there's just no two ways to do that remotely. You've got to have people on site and you've got to have a lot of people who are not necessarily familiar with your site there. What we're seeing, and we'll watch whether this is a trend or not, there are two things, Gautam, to your question. Number one, the scale of the turnaround. They may be doing one or two units versus the entire facility.

And secondly, the rate or the cycle at which the turnarounds are performed. Many of these facilities have now gone over 18, almost 24 months without a turnaround. They may question whether they can extend the cycle on turnaround and the frequency of turnarounds based on this experience. We haven't necessarily gotten that message yet, but we're watching it very carefully as we go through this cycle, particularly this season, over this summer into the fall. Ram, I don't know if you've got comments there.

Ram Krishnan -- Executive Vice President and Chief Operating Officer

Yes. No.

Gautam Khanna -- Cowen -- Analyst

Thank you, very helpful.

Ram Krishnan -- Executive Vice President and Chief Operating Officer

Yes, sir.

Lal Karsanbhai -- Chief Executive Officer and President

Okay. Okay. Well, I want to thank everyone for your questions and your engagement today. It was -- I felt phenomenal about my first quarter as CEO. I thank the teams, a lot of hard work and a lot of energy, and I feel really good about the momentum that we have as an organization for the second half of the year and into 2022. So thank you, everyone, for your time, and talk soon.

Pete Lilly -- Director of Investor Relations

Thank you.

Operator

[Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Pete Lilly -- Director of Investor Relations

Lal Karsanbhai -- Chief Executive Officer and President

Frank Dellaquila -- Senior Executive Vice President and Chief Financial Officer

Ram Krishnan -- Executive Vice President and Chief Operating Officer

John Walsh -- Credit Suisse -- Analyst

Nicole DeBlase -- Deutsche Bank -- Analyst

Nigel Coe -- Wolfe Research -- Analyst

Julian Mitchell -- Barclays -- Analyst

Scott Davis -- Melius Research -- Analyst

Steve Tusa -- JPMorgan -- Analyst

Andrew Obin -- Bank of America -- Analyst

Tommy Moll -- Stephens -- Analyst

Markus Mittermaier -- UBS -- Analyst

Jeff Reive -- RBC Capital -- Analyst

Andy Kaplowitz -- Citigroup -- Analyst

Gautam Khanna -- Cowen -- Analyst

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