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Rockwell Automation (ROK) to Post Q1 Earnings: What to Expect?

Zacks Equity Research

Rockwell Automation Inc. ROK is scheduled to report first-quarter fiscal 2020 results, before the opening bell on Jan 29.

The provider of industrial automation and information solutions worldwide beat estimates in three of the trailing four quarters, while missing in one. The company has an average four-quarter beat of 4.45%.

Q1 Estimates

The Zacks Consensus Estimate for first-quarter fiscal 2020 revenues is pegged at $1.64 billion, indicating a decline of 0.01% from the year-ago quarter. The same for the quarter’s earnings stands at $2.14, suggesting a fall of 3% from the prior-year reported figure. The figure has remained stable over the past 30 days.

Rockwell Automation, Inc. Price and EPS Surprise

Rockwell Automation, Inc. Price and EPS Surprise
Rockwell Automation, Inc. Price and EPS Surprise

Factors to Consider

The U.S.-China trade war and waning global demand have taken a toll on the U.S manufacturing sector in the October-December quarter. Per the Institute for Supply Management’s latest report, the U.S Purchasing Managers’ Index (PMI) was 47.2% in December — the lowest PMI reading since 46.3% in June 2009, which marked the last month of the Great Recession. This follows a reading of 48.1% and 48.3% in November and October, respectively. The PMI remained below 50 for five consecutive months, averaging 47.9% during October-December 2019.

Moreover, industrial production declined 0.3% in December following a 0.8% growth in November and 0.5% fall in October. Overall, for the fourth quarter, total industrial production declined at an annual rate of 0.5%.

Given that sales in the domestic markets account for roughly 55% of Rockwell Automation’s total sales, this contraction is anticipated to get reflected in the company’s first-quarter fiscal 2020’s revenues.

Further, uncertainty with respect to global trade had been weighing on customers’ investment decisions throughout the fiscal first quarter. Further, the persistent softness in the automotive market, and weak semiconductor and chemical markets are likely to have dampened the company’s top line as well.

Material cost inflation is likely to have impacted Rockwell Automation’s first-quarter 2020 margins. However, focus on productivity and initiatives to mitigate the impact of tariffs like the implementation of supply-chain alternatives, negotiations with vendors and price adjustments are anticipated to get reflected in the to-be-reported quarter results.

How Will The Segments Fare?

The Zacks Consensus Estimate for the Architecture & Software segment’s net sales is pegged at $741 million, indicating a decline of 2% from the year-ago quarter. The sales estimate for the Control Products & Solutions segment is pegged at $913 million, suggesting growth of 3% from the prior-year reported figure.

The Zacks Consensus Estimate for the Architecture & Software segment’s operating profit is pegged at $226 million, suggesting a decline of 5% from the prior-year quarter. The Zacks Consensus Estimate for operating profit for the Control Products & Solutions segment stands at $120 million, indicating a decline of 13% from the year-ago quarter.

What Our Model Indicates

Our proven model does not conclusively predict a beat for Rockwell Automation this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that is not the case here as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Rockwell Automation’s Earnings ESP is -6.71%.

Zacks Rank: The company currently carries a Zacks Rank #3.

Share Price Performance

Over the past year, Rockwell Automation’s shares have gained 22.5%, outperforming the industry’s growth of 12.4%.

Stocks Poised to Beat Earnings Estimates

Here are a few Industrial Products stocks, which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Lindsay Corporation LNN has an Earnings ESP of +8.07% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dover Corporation DOV has a Zacks Rank #3 and an Earnings ESP of +1.72%.

Lincoln Electric Holdings, Inc. LECO, a Zacks Ranked #3 stock, has an Earnings ESP of +1.01%.

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Click to get this free report Rockwell Automation, Inc. (ROK) : Free Stock Analysis Report Lincoln Electric Holdings, Inc. (LECO) : Free Stock Analysis Report Lindsay Corporation (LNN) : Free Stock Analysis Report Dover Corporation (DOV) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research