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What's in Store for Rockwell Automation (ROK) in Q4 Earnings?

Zacks Equity Research

Rockwell Automation Inc. ROK is scheduled to report fourth-quarter fiscal 2019 results, before the opening bell on Nov 12.

The provider of industrial automation and information solutions worldwide beat earnings estimates in three of the trailing four quarters, while missing in one. The company has an average four-quarter beat of 4.26%.

Rockwell Automation’s third-quarter 2019 adjusted earnings per share of 80 cents improved 11% year over year despite a drop of 2% in sales to $1.67 billion.

Rockwell Automation, Inc. Price and EPS Surprise

 

Rockwell Automation, Inc. Price and EPS Surprise

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

Q4 Estimates

The Zacks Consensus Estimate for third-quarter revenues is pegged at $1.68 billion, indicating a decline of 2.97% from the year-ago quarter. The same for fourth-quarter earnings is at $1.92, indicating a decline of 9% from the prior-year reported figure. The figure has also moved south by 2% over the past 30 days.

Factors to Consider

The U.S.-China trade war and waning global demand have probably taken a toll on the U.S manufacturing sector in the July-September quarter. Per the Institute for Supply Management’s latest report, the U.S Purchasing Managers’ Index (PMI) declined to 47.8% in September 2019 — the worst reading in a decade. This follows readings of 49.1% in August and 51.2% in July, indicating a contraction in the manufacturing sector. Moreover, industrial production declined 0.4% in September after a rise of 0.8% in August and a drop of 0.2% in July. Given that sales in the domestic markets account for roughly 55% of Rockwell Automation’s total sales, this contraction is anticipated to get reflected on the company’s fourth-quarter revenues.

Further, uncertainty with respect to global trade has been weighing on customers’ investment decisions throughout the fourth quarter. Further, the prevalent softness in the automotive market is likely to have dampened the company’s top line in the fourth quarter.

Material cost inflation, thanks to the imposition of tariffs last year, is likely to have impacted Rockwell Automation’s fourth-quarter 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 fourth-quarter results.

How Will The Segments Fare?

The Zacks Consensus Estimate for the Architecture & Software segment’s net sales is pegged at $734 million, indicating a decline of 7% from the year-ago quarter. The sales estimate for the Control Products & Solutions segment is pegged at $916 million, indicating a drop of 3% from the prior-year reported figure.

The Zacks Consensus Estimate for the Architecture & Software segment’s operating profit is pegged at $196 million, suggesting a decline of 11% from the prior-year quarter. The Zacks Consensus Estimate for operating profit for the Control Products & Solutions segment stands at $135 million, indicating a decline of 4% 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 -0.89%.

Zacks Rank: The company currently carries a Zacks Rank #4 (Sell).

Share Price Performance

Over the past year, Rockwell Automation’s shares have gained 1.7%, against the industry’s decline of 6.5%.

Stocks Worth a Look

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

Plug Power, Inc PLUG has an Earnings ESP of +58.33% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Intellicheck Mobilisa, Inc IDN has an Earnings ESP of +33.33% and a Zacks Rank of 3.

Horizon Global Corporation HZN has an Earnings ESP of +22.22% and a Zacks Rank of 2.

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