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What's in Store for Rockwell Automation (ROK) Q3 Earnings?

Zacks Equity Research

Rockwell Automation Inc. ROK is scheduled to report third-quarter fiscal 2019 results before the opening bell on Jul 25.

The Zacks Consensus Estimate for the fiscal third-quarter revenues is pegged at $1.73 billion, depicting year-over-year rise of 2.4%. Notably, the Zacks Consensus Estimate for earnings per share is pegged at $2.29, calling for a year-over-year improvement of 6%.

Rockwell Automation’s earnings surpassed estimates in three of the trailing four quarters, the average beat being 4.66%.

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

Key Factors to Consider

Rockwell Automation is poised to benefit from its focus on broadening the portfolio of hardware and software products, solutions and services. Further, significant investments to globalize manufacturing and develop products will stoke growth. The company is likely to witness above-market growth in the to-be-reported quarter through a combination of share gains in core platforms, double-digit growth in Information Solutions and Connected Services, as well as contribution from acquisitions and inorganic investments.

Heavy industries performed well in the last-reported quarter, led by oil and gas, pulp and paper and mining.  The momentum is likely to continue for Rockwell Automation in the quarter to be reported, driven by growth in emerging markets, while also creating solid demand for semiconductor and other heavy industries. Moreover, focus on productivity, actions to mitigate the impact of tariffs, and favorable macroeconomic indicators are expected to drive the company’s growth.

However, Rockwell Automation’s results in the fiscal third quarter will likely continue to bear the brunt of tariffs. The company expects to offset the impact through the implementation of supply-chain alternatives, negotiations with vendors and price adjustments on effective products. Furthermore, prevalent softness in the automotive market is likely to dampen the company’s results.

The Zacks Consensus Estimate for the Architecture & Software segment’s net sales is pegged at $783 million, calling for a year-over-year decline of 1.6%. The sales estimate for the Control Products & Solutions segment is pegged at $943 million, marking an increase of 4.4% over the prior-year quarter’s reported tally.

The Zacks Consensus Estimate for the Architecture & Software segment’s operating profit is pegged at $236 million, which reflects year-over-year decline of 1.2%. Operating profit for the Control Products & Solutions segment is expected to improve around 11% year over year to $160 million.

Rockwell Automation, Inc. Price and EPS Surprise

Rockwell Automation, Inc. Price and EPS Surprise

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

Earnings Whispers

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

Earnings ESP: Earnings ESP for Rockwell Automation is +1.13%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $2.33 and $2.29, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Rockwell Automation currently carries a Zacks Rank #4 (Sell).
Notably, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Share Price Performance

Over the past year, Rockwell Automation’s shares have declined around 2.7%, compared with the industry’s loss of 2.6%.

Stocks Worth a Look

Here are a few stocks that you may want to consider, as our model shows these have the right combination of elements to post an earnings beat this quarter:

Sealed Air Corporation SEE has an Earnings ESP of +1.34% and carries a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

AptarGroup, Inc. ATR, another Zacks #2 Ranked stock, has an Earnings ESP of +0.56%.

Terex Corporation TEX has an Earnings ESP of +1.56% and carries a Zacks Rank #3, currently.

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