Emerson Electric (NYSE:EMR) and a Look into its Future

Like any company that sales to equipment manufacturers and distributors, Emerson Electric (NYSE:EMR) is facing a big challenge in a time when revenue is starting to rebound but the price of raw materials is skyrocketing.

With capital spending from its customers starting to rise, Emerson recently said its sales by 2015 could be in a range of $32 billion to $35 billion. Revenue in 2010 was $21 billion.

Chief Executive Officer David Farr said, "We are entering a sweet spot. We've had two tough years, (and) are coming off a low base. People are starting to invest. The underlying global economies are just in the early stages of improving. The winds will stay to our back for the next two or three years."

But they also know they can't pass on all the price increases onto their customers, so they're looking at other ways to increase margins while still selling their existing products at or about current price levels.

Talking to analysts last week, Emerson revealed one of its strategies to deal with the inevitable pressure on margins and earnings, which is to sell new diagnostic and connectivity services which would help companies boost productivity and lower the amount of energy they use.

The company believes that could add another $1 billion in revenue over a five-year period. It is thought that it will more than make up for the margin and earnings pressure connected to raw materials.