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Rockwell Automation (ROK) Q1 Earnings: What's in the Offing?

Zacks Equity Research

Rockwell Automation Inc. ROK is scheduled to report first-quarter fiscal 2019 results before the opening bell on Jan 23.


In the last reported quarter, Rockwell Automation delivered earnings of $2.11 per share that beat the Zacks Consensus Estimate by 3.9%. The figure also improved 25% year over year. Notably, the company’s earnings have surpassed estimates in the trailing four quarters, with average beat being 7.00%.


Let’s see how things are shaping up for this announcement.


Rockwell Automation, Inc. Price and EPS Surprise



Rockwell Automation, Inc. Price and EPS Surprise

Rockwell Automation, Inc. price-eps-surprise | Rockwell Automation, Inc. Quote

Key Factors to Consider

Heavy industries performed well in the last reported quarter, led by semiconductor, metals and chemicals. The momentum is likely to continue in the fourth quarter driven by growth in emerging markets. Growth of the middle class will create demand for semiconductor and other heavy industries aiding momentum further. In China, the impact of trade tensions is expected to be partially offset by government stimulus. Strong domestic and foreign demand in India is anticipated to sustain continued manufacturing growth. Additionally, Latin America may continue to benefit from a strong U.S. economy.

Global industrial capital spending is on the rise and anticipated to continue to be a tailwind in the to-be-reported quarter. Global manufacturing environment remains favorable and macroeconomic indicators are positive. PMI (Purchasing Managers' Index) remained above 50 in the last 12 months, indicating a continued expansion in the U.S. manufacturing economy. Further, Architecture Billings Index (ABI) also remained above 50, reflecting improving business conditions.


However, results in first-quarter fiscal 2019 will bear the brunt of tariffs. Rockwell Automation expects to offset the impact through implementing supply chain alternatives, negotiations with vendors and price adjustments on effective products.


The Zacks Consensus Estimate for revenues for the fiscal first quarter is pegged at $1.6 billion, depicting a year-over-year rise of 3%. The Zacks Consensus Estimate for earnings at $1.98 per share reflects a year-over-year improvement 1%.


The Zacks Consensus Estimate for the Architecture & Software segment’s net sales is pegged at $773 million, an estimated year-over-year rise of 3%. The estimate for the Control Products & Solutions segment’s sales is pegged at $864 million, an increase of 3% over the prior-year quarter.


The Architecture & Software segment’s operating profit is expected to remain flat on a year-over-year basis at $224 million. Operating profit for the Control Products & Solutions segment is anticipated to decline around 5% year over year to $125 million.


Earnings Whispers


Our proven model does not conclusively show a beat for Rockwell Automation this earnings season. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.


Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -0.95%. This is because the Most Accurate Estimate is at $1.97, while the Zacks Consensus Estimate is pegged at $1.98. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.


Zacks Rank: Rockwell Automation has a Zacks Rank #3 which when combined with an Earnings ESP of -0.95%, does not indicate a likely positive surprise.


We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.


Share Price Performance



Over the past year, Rockwell Automation dipped around 23%, in-line with the industry.


Stocks Worth a Look


Here are a few stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.


Heritage-Crystal Clean, Inc. HCCI has an Earnings ESP of +1.12% and a Zacks Rank #2. The company’s shares have advanced 11% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.


Cintas Corporation CTAS has an Earnings ESP of +4.87% and a Zacks Rank #2. The stock has gained 10% in a year’s time.


W.W. Grainger Inc. GWW has an Earnings ESP of +1.61% and a Zacks Rank #3. Its shares have gained 27% in the past year.


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