As Pete mentioned, I'm coming into this role from our Automation Solutions finance organization, and I've been with Emerson for over 13 years.
The operating leverage -- profit leverage at 34% was very strong and now most importantly, has given us the room to accelerate investment in differentiating technologies and further -- that will further, I think, drive relevance -- increased relevance at our customer base.
Adjusted earnings per share was $1.09, up 36% from the prior year.
Demand continues to strengthen with sales coming in ahead of our expectations with underlying growth of 15%, and June trailing 3-month orders were at 26%.
Automation Solutions notably turned positive this quarter in both sales and orders, up 9% in sales and 17% on an underlying basis.
Commercial & Residential Solutions continues to experience robust demand across the business and geographies with 29% sales growth and 43% orders growth on an underlying basis.
And along with the additional volume and leverage, they drove adjusted segment EBIT growth of 40%, 280 basis points of increased margin to 19.6%.
Cash flow continues to be very strong with operating and free cash flow up approximately 30% year-over-year and free cash flow conversion exceeding 150% of net earnings.
In this quarter, we initiated $32 million of restructuring actions.
Operations added 33% to adjusted EPS, and it was balanced between the platforms.
Leverage was 34% across the enterprise.
Tax, currency, pension, stock comp netted to a $0.05 headwind, and there was a minor favorable impact from share repurchase.
Again, in total, adjusted earnings per share was $1.09, up 36%.
So as I mentioned, underlying sales is up 15%.
Gross profit increased 90 basis points to 42.4%, driven mainly by the benefits of the cost reduction actions and then the leverage on the volume across the enterprise.
Adjusted EBIT margin was 18.4%, up 310 basis points.
Effective tax rate was 19.2% versus 11% in the prior year.
This was a $0.10 headwind year-over-year that we overcame.
Adjusted EPS, as mentioned, was $1.09 versus $0.80 last year.
Adjusted segment EBIT again increased 40%, margin up 280 basis points.
Adjusted pre-tax earnings increased 350 basis points to 17.6%.
Operating cash flow was very strong, up 31% at $1.1 billion.
Free cash flow was $977 million, also up a little over 30%, driven by strong earnings growth and effective working capital management.
Lastly, the trade working capital ratio improved to 15.4% of sales.
Underlying sales turned positive this quarter at 8%.
Trailing 3-month orders accelerated to 17%.
Adjusted EBIT margin increased 320 basis points and 310 basis points at adjusted EBITDA, driven mainly by the flow-through of the cost reset savings and by the volume leverage.
Backlog increased to $5.5 billion.
It is up 17% year-to-date.
Sales were up on an underlying basis 29% versus the prior year.
The June trailing 3-month underlying orders were up 43%, and it was very balanced across both Climate Technologies and Tools & Home products.
The Americas were up 29% with continued strength across all end markets.
Europe was up 37%, driven by continued heat pump demand and increasing sales of professional tools.
Asia, Middle East and Africa was up 25%, driven by Cold Chain and various heating technologies.
Margins improved by 170 basis points of adjusted EBIT and 120 basis points of adjusted EBITDA driven by the strong volume leverage and the cost reset savings, which more than offset the price/cost headwinds that we are seeing in the business.
Steel prices are at record highs with 11 months of consecutive increases and in our estimation, have not peaked yet.
And while copper pricing has receded off record highs, it is still up over $1.40 a pound year-over-year.
Electronics shortages are proliferating in most of our businesses, impacting both platforms, and supply is expected to remain constrained well into 2022.
It is important to note that price/cost remains at an unfavorable $75 million as we estimated last quarter.
We now expect underlying sales growth to be near the top of our May guidance of approximately 5% to 6%, Commercial Residential above their range in May at 15% to 16% and Automation Solutions closer to the top of that range at 0% to 1%.
Our estimates are now 50 basis points above the previous guidance, increasing adjusted EBIT margin and adjusted EBITDA by 0.5% to approximately 18% and 23%, respectively.
Strong profitability and working capital performance enabled an increase in our operating cash flow and free cash flow estimates, both of which increased by $300 million.
We are also raising our adjusted earnings per share guidance to $4.07, plus or minus $0.01.
Our price/cost headwind for 2021 currently remains as estimated in Q2 and Ram covered at $75 million despite the current challenges that were highlighted.
Stock compensation impact increases to $125 million.
So now we'll go over to Chart 16, and I'll just frame the order environment that we've experienced through the last three months.
Commercial & Residential Solutions continues to see strength in Residential, Cold Chain and the Professional Tools business, and all three very near to that average band of 43%.
The Americas really strengthened, up 29% as deferred maintenance demand and site access drove momentum.
Let's now turn to Chart 17, and I'll review the underlying sales growth outlook.
Q3 underlying sales were up 15% versus prior year, exceeding our management expectations, driven by the strength in Commercial & Residential Solutions as well as the North America recovery just discussed.
Full year expectations on underlying sales are between 5% and 6%, at the top end of our prior guidance of 3% to 6% and sales of approximately $18.4 billion.
For the remainder of the year, we expect to see the North America business continue to recover in Automation Solutions as well as continued broad strength in commercial residential solutions.
As Frank mentioned, for the full year, we are expecting Automation Solutions sales to be flat to 1% and Commercial & Residential Solutions to be between 15% and 16%, driving us to our overall 5% to 6% underlying sales expectations.
Quarter four is expected to be strong in Automation Solutions at approximately 20% growth, broad-based recovery across all industries, led by continued strength in discrete and increasing strength in hybrid.
For KOB 3, we expect to see continued spend for deferred maintenance and increasing spend for site access that has been pent-up from the pandemic with an expectation that we will see a strong fall shutdown turnaround season.
Let's now turn to Chart 19, and we'll review the business funnel for Automation Solutions.
So back in February, we commented that our traditional large project funnel was $6.4 billion, and this should be something that is very familiar to those of you who watch this carefully.
Since February, we have booked approximately $80 million of projects, some LNG and one most notably in Mexico.
The August 2021 funnel is now valued at $6.3 billion in approximately 180 projects.
Today, as depicted on the chart, these opportunities are worth $400 million in approximately 120 projects.
The combination of our traditional project funnel and the new sustainability funnel is now valued at $6.7 billion.
The value of these opportunities is $1.5 billion and are made up of 530 projects.
To give you some perspective on the scale and how differentiated it is, approximately 15% of that $1.5 billion has a value of greater than $5 million, and 50% of it is between $1 million and $5 million.
The funnel is global, although approximately $1 billion of it is in North America and Europe.
Now let's turn to Chart 20.
It involves over $600 million in spend and approximately $650 million in savings.
In February, we also introduced our midrange targets of 24% adjusted EBITDA margins and $4.75 to $5 in adjusted EPS.

Summary:
Adjusted earnings per share was $1.09, up 36% from the prior year.
Automation Solutions notably turned positive this quarter in both sales and orders, up 9% in sales and 17% on an underlying basis.
Again, in total, adjusted earnings per share was $1.09, up 36%.
Adjusted EPS, as mentioned, was $1.09 versus $0.80 last year.
Electronics shortages are proliferating in most of our businesses, impacting both platforms, and supply is expected to remain constrained well into 2022.
We are also raising our adjusted earnings per share guidance to $4.07, plus or minus $0.01.
For the remainder of the year, we expect to see the North America business continue to recover in Automation Solutions as well as continued broad strength in commercial residential solutions.
Quarter four is expected to be strong in Automation Solutions at approximately 20% growth, broad-based recovery across all industries, led by continued strength in discrete and increasing strength in hybrid.