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Rockwell Automation Wraps Up Sensia JV Deal With Schlumberger

Zacks Equity Research

Rockwell Automation, Inc. ROK and Schlumberger are set to close their joint venture (JV) — Sensia — the first digitally-enabled, integrated automation solutions provider for oil and gas industry.

In February 2019, Rockwell Automation entered into the agreement with Schlumberger to create this JV. It will offer scalable, cloud and edge-enabled process automation, as well as information and process-safety solutions. The JV will boost customer efficiency through data-driven intelligent automation.

Schlumberger’s impressive know-how of the oil and gas industry, together with Rockwell Automation’s expertise in industrial automation and information solutions will help Sensia address the fast-growing market. While Sensia will provide industrial-scale digitalization and seamless automation to every oil and gas company to improve their asset productivity and profitability, it will also make oil and gas production, transportation and processing easier and more secure.

Oilfield operators strive to maximize their investment value by safely reducing the drilling and production time, optimizing well output and extending well life. Hence, Sensia will be able to connect different assets and reduce manual processes with scalable solutions that are integrated into a single technology platform.

Headquartered in Houston, TX, Sensia is expected to generate initial annual revenues of $400 million and employ around 1,000 people. Under the terms of agreement, Sensia will operate as an independent entity, with Rockwell Automation owning 53% and Schlumberger owning the balance. In closing the deal, Rockwell Automation paid $250 million in cash to Schlumberger.

Rockwell Automation has accelerated its investments to expand the company’s process capabilities, in a bid to drive growth. The company is also actively engaged in the evaluation of inorganic opportunities to accelerate the Connected Enterprise strategy. Meanwhile, it continues to look for more acquisition opportunities.

For Rockwell Automation, heavy industries will be the primary catalyst. In oil and gas, the company is witnessing solid growth across all regions as customers are focusing on productivity, improvements and digitization initiatives. Further, robust growth in mining is likely to be aided by investments in iron ore and copper, electric vehicle-related commodities, and investments on digitization.

The company will likely benefit from focus on broadening its portfolio of hardware and software products, solutions, and services. Furthermore, significant investments to globalize manufacturing, product development and customer-facing resources will stoke growth. Also, focus on productivity and initiatives to mitigate the impact of tariffs will likely be conducive to the company’s growth.

Over the past year, Rockwell Automation’s shares have dipped 17.8% compared with the industry’s decline of 19.3%.

Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the Industrial Products sector are AGCO Corp. AGCO, John Bean Technologies Corporation JBT and UFP Technologies, Inc. UFPT. While AGCO Corp sports a Zacks Rank #1 (Strong Buy), John Bean Technologies and UFP Technologies carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AGCO Corp. has a projected earnings growth rate of 11.2% for the current year. The stock has gained 35.9% so far this year.

John Bean Technologies has an estimated earnings growth rate of 13.08% for 2019. The company’s shares have appreciated 38.5% year to date.

UFP Technologies has an expected earnings growth rate of 8.10% for the ongoing year. The stock has jumped 28.5% in the year-to-date period.

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