Rockwell Automation Beats Estimates
Rockwell Automation, Inc. (ROK) reported fourth quarter fiscal 2012 earnings of $1.38 per share compared with $1.39 in the prior-year quarter. The results were ahead of the Zacks Consensus Estimate of $1.32.
Sales inched up 1% to $1.664 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.617 billion. Organic sales increased 5% while currency translation negatively impacted sales by 4 percentage points.
Cost of sales increased 2% year over year to $1 billion from $991 million in the prior-year quarter. Gross profit declined 1% year over year to $654 million, with gross margins contracting 80 basis points (bps) to 39.3%.
Selling, general and administrative expenses decreased marginally to $386 million from $388 million in the prior-year quarter. Segment operating income was $295 million in the quarter compared with $298 million in the fourth quarter of 2011. Segment operating margin contracted 30 basis points to 17.7%.
Segment Results
Architecture & Software: Net sales declined 2% to $671 million in the quarter. Organic sales increased 2% while currency translation affected sales by 4%. Operating earnings were $166.5 million, down 6.4% year over year. Segment operating margin was 24.8% compared with 26% a year ago.
Control Products & Solutions: Net sales increased 2% to $992.7 million in the quarter. Organic sales were up 6% while currency translation impacted sales by 4%. Segment operating earnings improved 7% to $128.8 million. Segment operating margin was 13%, a 60-basis points year-over-year improvement.
Fiscal 2012 Performance
The company reported fiscal 2012 adjusted earnings of $5.29 per share compared with $4.89 in the prior fiscal, surpassing the Zacks Consensus Estimate of $5.09. Including non-operating pension costs and its tax effect, the company reported earnings of $5.13 compared with $4.79 in the prior year.
Sales increased 4% to $6.259 billion, beating the Zacks Consensus Estimate of $6.218 billion. Organic sales increased 6%, acquisitions added 1% while currency translation negatively impacted sales by 3%.
Financials
Rockwell had cash and cash equivalents of $903.9 million as of fiscal 2012 end compared with $988.9 million as of fiscal 2011 end. Total debt was $1.06 billion as of September 30, 2012, compared with $905 million as of September 30, 2011. The debt-to-capitalization ratio was 36.4% as of September 30, 2012, compared with 34.1% as of September 30, 2011. In fiscal 2012, the company generated cash flow from operating activities of $718.7 million, up from $643.7 million in the prior year.
During the reported quarter, Rockwell repurchased 1.4 million shares for $96 million. During fiscal 2012, the company repurchased 3.7 million shares for $265.3 million. As of September 30, 2012, the company had $936.7 million worth of shares remaining under the $1 billion share repurchase authorization.
Guidance
Rockwell expects sales to be around $6.35 to $6.65 billion in fiscal 2013. The company has factored in organic growth of 1% to 5% while currency translation and acquisitions will add one point of growth. It expects earnings in the range of $5.35 to $5.75 per share.
Our Take
During the year, Rockwell Automation hiked the quarterly dividend by 11% and continued to repurchase shares, adding value to the share holders. Rockwell’s commitment toward increasing shareholders return reflects its free cash flow generating capability and a strong balance sheet. Going into 2013, the sluggish global economy and a weaker solutions backlog will remain headwinds for the company.
Based in Milwaukee, Wisconsin, Rockwell Automation is an original equipment manufacturer (:OEM) of industrial automation equipment, application specific integrated software and consulting design services. The company is a leading global provider of industrial automation power, control, and information solutions.
Rockwell competes with ABB Ltd (ABB), Emerson Electric Company (EMR) and Siemens AG (SI). Currently, it retains a Zacks #3 Rank, which translates to a short-term (1 to 3 months) Hold rating.
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