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* Sees FY 2017 adj. sales flat to down 2 pct vs decline of 1-3 pct
* Expects EPS from cont. ops. $2.47-$2.62 vs $2.35-$2.50
* Shares rise 6.1 pct to more than 2-year high (Adds details, background, shares)
Feb 7 (Reuters) - Emerson Electric Co reported a higher-than-expected quarterly profit, helped by strong demand in China for its air conditioning and refrigeration parts, and the company raised its full-year sales and earnings forecasts.
The company's shares rose as much as 6.1 percent to a more than two-year high of $63.50 in morning trading on Tuesday.
Emerson said its commercial and residential solutions division gained from a 40 percent sales growth in China, where demand for its air conditioning and refrigeration components had risen significantly over the last two quarters.
China's economy likely grew around 6.7 percent in the fourth quarter as a stimulus-fueled construction boom breathed new life into its long ailing "smokestack" heavy industries. (reut.rs/2ki2V65)
Overall sales in the unit, which makes air conditioning compressors, sensors and thermistors for home appliances and ignition systems for furnaces, rose 6.3 percent to $1.25 billion in the first-quarter ended Dec. 31.
However, sales in the automation solutions business fell 9 percent to $1.97 billion in the quarter. The division accounted for 61.2 percent of Emerson's quarterly revenue.
The business makes valves and regulators for the oil and gas industry and has struggled as customers clamped down on spending due to a slump in oil prices.
However, with a recovery in oil prices, Emerson said it saw improving order rates in the business, particularly in North America, towards the end of the first quarter.
"Emerson has now 'rounded Cape Horn' and should now be positioned for generally positive improvement in its fundamental performance over the rest of the decade," William Blair analyst Nick Heymann wrote in a note.
Emerson said its margins in the quarter were also boosted by savings from restructuring taken during the past two years.
The company's pretax margin rose 14.4 percent in the first quarter, from 13 percent a year earlier.
Emerson said it expected fiscal 2017 sales to be flat to down 2 percent, excluding the impact of a strong dollar, compared with its previous forecast of a decline of 1-3 percent.
The company, which gets nearly half of its revenue from outside the United States, lifted its forecast for earnings per share from continuing operations to $2.47-$2.62 from the $2.35-$2.50 it had previously forecast.
Earnings from continuing operations rose to $370 million, or 56 cents per share, from $307 million, or 46 cents per share, a year earlier. (bit.ly/2khitXI)
The latest results included an income tax benefit of 7 cents per share.
Net sales fell 3.6 percent to $3.22 billion.
Analysts on average had expected earnings of 42 cents per share and revenue of $3.17 billion, according to Thomson Reuters I/B/E/S. (Reporting by Ankit Ajmera in Bengaluru; Editing by Anil D'Silva and Sriraj Kalluvila)