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Rockwell Automation (ROK) Q1 Earnings Beat Estimates, Up Y/Y

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Zacks Equity Research
·5 min read
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Rockwell Automation Inc. ROK reported adjusted earnings of $2.38 in first-quarter fiscal 2021 (ended Dec 31, 2020), beating the Zacks Consensus Estimate of $1.92. The bottom line also improved 11% year over year primarily due to a $70 million pre-tax favorable legal settlement in the quarter under review (45 cents per share), partially offset by a higher tax rate and increased incentive compensation expenses.

Including one-time items, the company’s earnings was $5.06 per share, reflecting a significant improvement from the $2.66 in the year-ago quarter.

Total revenues were $1,565.3 million, down 7% from the prior-year quarter. The top line missed the Zacks Consensus Estimate of $1,613 million. While organic sales in the quarter were down 9.7%, currency translation had a positive impact of 0.8 percentage points. Further, acquisitions contributed 1.8% to sales.

Rockwell Automation, Inc. Price, Consensus and EPS Surprise

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

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

Operational Update

Cost of sales decreased 6% year over year to $919 million. Gross profit declined 8% year over year to $646.5 million. Selling, general and administrative expenses dropped 7% year over year to $374.6 million.

Consolidated segment operating income totaled $309 million, down 9% from the prior-year quarter. Segment operating margin was 19.8% in the fiscal first quarter compared with 20.1% in the prior-year quarter.

Segment Results

Intelligent Devices: Net sales amounted to $722 million in the fiscal first quarter, reflecting year-over-year decline of 7%. Segment operating earnings totaled $140 million compared with $161 million in the prior-year quarter. Segment operating margin contracted to 19.4% in the quarter compared with the year-ago quarter’s 20.7%, due to lower sales, partially offset by temporary and structural cost savings.

Software & Control: Net sales declined 2.5% year over year to $441 million in the reported quarter. Segment operating earnings decreased 5% year over year to $133 million. Segment operating margin was 30.2%, compared with 31.0% in the year-earlier quarter due to lower sales, partially mitigated by temporary and structural cost savings.

Lifecycle Services: Net sales for the segment amounted to $403 million in the reported quarter, reflecting year-over-year decline of 12%. Segment operating earnings totaled $36 million compared with the $38 million in the prior-year quarter. Segment operating margin was 8.9% in the quarter compared with 8.4% in the prior-year quarter. Temporary and structural cost savings led to the improvement in margins.

Financials

As of end of first-quarter fiscal 2021, cash and cash equivalents were around $730.4 million compared with $705 million as of fiscal 2020 end. As of Dec 31, 2020, total debt was around $2.13 billion compared with $2 billion as of Sep 30, 2020.

Cash flow from operations for first-quarter fiscal 2021 was $346.5 million compared with $231.1 million in the prior-year quarter. Return on invested capital was 39.7% as of Dec 31, 2020, compared with 32.9% as of Dec 31, 2019.

During the quarter under review, Rockwell Automation repurchased 0.4 million shares for $87.7 million. As of the end of first-quarter fiscal 2021, $766 million was available under the existing share-repurchase authorization.

Fiscal 2021 Guidance Hiked

The company witnessed double digits increase in orders on a sequential basis, exceeding pre-pandemic levels. It witnessed strong demand for Intelligent Devices and Information Solutions, which is expected to drive higher growth for the year. Backed by the strong demand, Rockwell Automation has raised its guidance for fiscal 2021 to the band of $8.70-$9.10 from the previous $8.45-$8.85. Organic sales growth is expected between 4.5% and 7.5%, up from the previous expectation of 3.5% to 6.5%. Reported sales growth is anticipated in the range of 8.5% to 11.5%, up from the previous band of 6% to 9%. Inorganic sales growth is projected to be around 1.5% for the fiscal year.

Share Price Performance

Over the past year, Rockwell Automation’s shares have appreciated 34.5%, compared with the industry’s growth of 37.8%.

Zacks Rank & Stocks to Consider

Rockwell Automation currently carries a Zacks Rank #3 (Hold).

Some better ranked stocks in the Industrial Products sector include AGCO Corporation AGCO, Lakeland Industries, Inc. LAKE and Avery Dennison Corporation AVY. While AGCO and Lakeland Industries flaunt a Zacks Rank #1 (Strong Buy), Avery carries a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO has an estimated earnings growth rate of 22% for the ongoing year. Shares of the company have gained 62% in a year’s time.

Lakeland Industries has an expected earnings growth rate of 51% for fiscal 2021. The stock has appreciated 68% in the past year.

Avery Dennison has a projected earnings growth rate of 6% for the current year. Over the past year, the company’s shares have rallied 22%.

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