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Rockwell Automation (ROK) Tops on Q2 Earnings, Hikes Outlook

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Rockwell Automation Inc. ROK delivered adjusted earnings per share of $1.89 in second-quarter fiscal 2018 (ended Dec 31, 2017), up 22% from $1.55 recorded in the prior-year quarter. The year-over-year performance was driven by elevated sales. Earnings also surpassed the Zacks Consensus Estimate of $1.80.

Including one-time items, the company reported earnings of $1.77 per share, compared with earnings of $1.45 per share reported in the year-ago quarter.

Total revenues came in at $1,651 billion in the quarter, up 6.2% year over year. However, revenues missed the Zacks Consensus Estimate of $1,654 million. Organic sales rose 3.5%. Foreign currency translations bolstered sales by 3.9%, while divestitures in the prior year reduced sales by 1.2%.


Operational Update


Cost of sales increased 6% year over year to $950 million. Gross profit went up 7% to $701 million from $657 million reported in the year-ago quarter. Selling, general and administrative expenses dipped 5% to $389 million.


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

Consolidated segment operating income was $345 million, up 17% from $296 million recorded in the prior-year quarter. Segment operating margin was 20.9% in the reported quarter, a 190-basis-point expansion from the year-earlier quarter due to higher sales.

Segment Results

Architecture & Software: Net sales rose 7% year over year to $768 million in the second quarter. Organic sales were up 2.5% and currency translation bolstered sales by 4.4%. Segment operating earnings were $218 million compared with $191 million recorded in the prior year. Segment operating margin was 28% compared with 27% witnessed in the year-ago quarter.


Control Products & Solutions: Net sales climbed 6% to $883 million in the reported quarter. Organic sales increased 4.4%, currency translation improved sales by 3.6%, and the prior-year divestiture reduced sales by 2.3%. Segment operating earnings increased 20% to $127 million from $108 million in the year-ago quarter. Segment operating margin came in at 14% compared with 13% recorded in the prior-year quarter.




As of Mar 31, 2018, cash and cash equivalents were $1,434 million, up from $1,411 million as of Sep 30, 2017. As of Mar 31, 2018, total debt was $1,538 million, down from $1,844 million as of Sep 30, 2017.


Cash flow from operations came in at $594 million in the reported quarter compared with $612 million recorded in the year-ago quarter. Return on invested capital was 43.6% as of Mar 31, 2018, up from 36.4% as of Mar 31, 2017.


During the fiscal second quarter, Rockwell Automation repurchased 2.5 million shares for $465 million. As of Mar 31, 2018, $934.8 million remained available for repurchase.


The company’s board of directors declared a quarterly dividend of 92 cents per share on its common stock, payable on Jun 11, 2018 to shareowners of record at the close of business on May 14, 2018.




Backed by favorable global manufacturing environment, positive macroeconomic indicators and strong first-half results, Rockwell Automation raised adjusted EPS guidance to $7.70-$8.00 from the prior $7.60-$7.90. However, the company maintained reported sales growth outlook at 4.5-7.5% and organic sales growth guidance at 3.5-6.5%.


Rockwell Automation expects to benefit from expanded product offering and strong customer relationships. Its strategic focus on the Connected Enterprise and substantial investments in technology will fuel growth. The company is well positioned to benefit from attractive opportunities in the industrial automation and information market.


Share Price Performance



Rockwell Automation's shares have underperformed the industry in the past year. The company’s shares have appreciated 1.3%, while the industry dipped 0.1%.


Zacks Rank & Other Stocks to Consider


Rockwell Automation currently carries a Zacks Rank #2 (Buy).


Other top-ranked stocks in the same industry include Alarm.com Holdings, Inc. ALRM, H&E Equipment Services, Inc. HEES, and Caterpillar Inc. CAT. While Alarm.com and H&E Equipment Services sport a Zacks Rank #1 (Strong Buy), Caterpillar carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.


Alarm.com has a long-term earnings growth rate of 15.6%. The stock has appreciated 26% in a year’s time.


H&E Equipment Services has a long-term earnings growth rate of 14.4%. The company’s shares have been up 60% in the past year.


Caterpillar has a long-term earnings growth rate of 12%. Its shares have rallied 38% in the past year.


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