Rockwell Automation Inc. ROK is scheduled to report second-quarter fiscal 2020 results, before the opening bell on Apr 28.
The Zacks Consensus Estimate for second-quarter fiscal 2020 revenues is pegged at $1.62 billion, indicating a decline of 1.9% from the year-ago quarter. The same for the quarter’s earnings stands at $1.86, suggesting a fall of 8.8% from the prior-year reported figure. The figure has moved south over the past 30 days.
Let’s see how things have shaped up prior to this announcement.
Factors to Consider
Rockwell Automation serves discrete end markets, which include automotive, semiconductor and general industries. Consequently, a sluggish automotive market and overall slowdown in the U.S manufacturing sector primarily due to the coronavirus pandemic might have thwarted demand for its products. Per the Institute for Supply Management, the U.S Purchasing Managers’ Index (PMI) remained below 50 (indicating contraction) for five months in a row till December. Although the index climbed above 50 in January and February, it again contracted to 49.1% in March due to the coronavirus outbreak. A weak manufacturing backdrop, uncertainty in the market and cautious customer spending was further aggravated by the coronavirus outbreak in the March-end quarter.
Moreover, industrial production declined 5.4% in March, while manufacturing output fell 6.3%, with the largest decline in motor vehicles and parts industries. Given that sales in the domestic markets account for roughly 54% of Rockwell Automation’s total sales, this contraction is anticipated to get reflected in the company’s fiscal second-quarter revenue numbers. Further, weak semiconductor and chemical markets are likely to have dampened the company’s performance during the period under consideration.
Material cost inflation is likely to have affected Rockwell Automation’s margins in the quarter to be reported. However, focus on productivity and initiatives to mitigate the impact of tariffs are anticipated to have benefited the company during the quarter.
Recently, Rockwell Automation announced temporary cost-containment measures in the wake of weak demand and uncertain market conditions due to the COVID-19 pandemic. Management assured that the company has performed well on the top-line front in the fiscal second quarter despite a weak performance in China. The company is taking preemptive actions to align its cost structure with the current turbulent economic environment.
How Will the Segments Fare?
The Zacks Consensus Estimate for the Architecture & Software segment’s net sales is pegged at $700 million, indicating a decline of 5.4% from the year-ago quarter. The Zacks Consensus Estimate for the segment’s operating profit is pegged at $191 million, suggesting a decline of 9% from the prior-year quarter.
The Zacks Consensus Estimate for the Control Products & Solutions segment’s revenues is pegged at $924 million, suggesting year-over-year growth of 0.6%. The Zacks Consensus Estimate for the segment’s operating profit is pinned at $130 million, indicating a decline of 9.7% from the year-ago quarter reported figure.
Rockwell Automation, Inc. Price and EPS Surprise
Rockwell Automation, Inc. price-eps-surprise | Rockwell Automation, Inc. Quote
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 -3.16%
Zacks Rank: The company currently carries a Zacks Rank #3.
Share Price Performance
Over the past year, Rockwell Automation’s shares have lost 12.1% compared with the industry’s decline of 17.7%.
Stocks Poised to Beat Earnings Estimates
Here are a few Industrial Products stocks, which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:
Axon Enterprise, Inc. AAXN has an Earnings ESP of +2.13% and carries a Zacks Rank of 3 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lawson Products, Inc. LAWS currently carries a Zacks Rank #3 and has an Earnings ESP of +3.85%.
Ball Corporation BLL, another Zacks #3 Ranked stock, has an Earnings ESP of +1.56%.
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