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Rockwell Automation (ROK) Tops in Q3, Curbs Sales Outlook
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Rockwell Automation, Inc. (ROK - Free Report) reported adjusted earnings per share of $1.55 in third-quarter fiscal 2016, down 3% from $1.59 earned in the prior-year quarter. Earnings, however, outpaced the Zacks Consensus Estimate of $1.46 and recorded a positive earnings surprise of 6%.
Including one-time items, the company’s earnings came in at $1.46 per share, down 4% from the year-ago quarter figure of $1.52.
Total revenue was $1,474 million in the quarter, declining 6.4% year over year and also missed the Zacks Consensus Estimate of $1,487 million. Organic sales fell 4.8%, while unfavorable foreign currency translations had an impact of 1.8%.
Operational Update
Cost of sales dropped 4.4% year over year to $857 million. Gross profit tanked 9% to $616.8 million from $678.2 million in the year-ago quarter. Gross margin contracted 130 basis points (bps) to 41.8%.
Selling, general and administrative expenses decreased 7.9% to $346.7 million. Consolidated segment operating income was $311 million, down 10% from $343.7 million in the prior-year quarter. Operating margin contracted 70 bps to 21.1% primarily due to lower sales.
Segment Results
Architecture & Software: Net sales went down 2.5% year over year to $666.4 million. Organic sales decreased 1.3%, while currency translations hurt sales by 1.6%. Segment operating earnings were $184.2 million, compared with $200 million a year ago. Operating margin contracted 160 bps to 27.6% from 29.2% a year ago, primarily due to lower sales and unfavorable mix and currency effects.
Control Products & Solutions: Net sales fell 9.4% to $807.6 million. Organic sales declined 7.5%, while currency translations dented sales by 1.9%. Segment operating earnings dropped 11.8% to $126.8 million from $143.8 million in the year-ago quarter. Operating margin decreased 40 bps to 15.7%.
Financials
As of Jun 30, 2016, cash and cash equivalents were $1,509.3 million, up from $1,427.3 million as of Sep 30, 2015. As of Jun 30, 2016, long-term debt was $1,521.8 million, up from $1,500.9 million as of Sep 30, 2015.
Cash flow from operations came in at $675.3 million for the nine-month period ended Jun 30, 2016 compared with $839.7 million in the comparable year-ago period. Return on invested capital was 32.6% as of Jun 30, 2016, decreased from 33.1% in the year-ago quarter.
During the reported quarter, Rockwell Automation repurchased 1.1million of its shares for $121.7 million. As of Jun 30, 2016, $1,075.2 million was available under the existing share repurchase authorization.
Rockwell Automation revised its fiscal 2016 adjusted EPS guidance to $5.80–$6.00 from the previous range of $5.75–$6.15. The company expects revenue to shrink 7% for the full year, which includes a currency headwind of about 3% and an organic sales decline of 4%.
Rockwell Automation reduced fiscal 2016 sales outlook due to weaker-than-expected orders and sales performance in its solutions and services businesses in the third quarter. Nevertheless, the company believes sequential sales improvement in the second half of the fiscal year, but not as much as anticipated in April.
The company remains confident about its long-term growth prospects through investments in innovation, domain expertise and commercial resources. In mixed-market conditions, it expects consistent improvement in product sales.
Milwaukee-based Rockwell Automation is a leading global provider of industrial automation equipment, application-specific integrated software and consulting design services. It also offers industrial automation power, control and information solutions.
Currently, Rockwell holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Allegion Plc (ALLE - Free Report) , Columbus McKinnon Corp. (CMCO - Free Report) and Cintas Corp. (CTAS - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy).
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Rockwell Automation (ROK) Tops in Q3, Curbs Sales Outlook
Rockwell Automation, Inc. (ROK - Free Report) reported adjusted earnings per share of $1.55 in third-quarter fiscal 2016, down 3% from $1.59 earned in the prior-year quarter. Earnings, however, outpaced the Zacks Consensus Estimate of $1.46 and recorded a positive earnings surprise of 6%.
Including one-time items, the company’s earnings came in at $1.46 per share, down 4% from the year-ago quarter figure of $1.52.
Total revenue was $1,474 million in the quarter, declining 6.4% year over year and also missed the Zacks Consensus Estimate of $1,487 million. Organic sales fell 4.8%, while unfavorable foreign currency translations had an impact of 1.8%.
Operational Update
Cost of sales dropped 4.4% year over year to $857 million. Gross profit tanked 9% to $616.8 million from $678.2 million in the year-ago quarter. Gross margin contracted 130 basis points (bps) to 41.8%.
Selling, general and administrative expenses decreased 7.9% to $346.7 million. Consolidated segment operating income was $311 million, down 10% from $343.7 million in the prior-year quarter. Operating margin contracted 70 bps to 21.1% primarily due to lower sales.
Segment Results
Architecture & Software: Net sales went down 2.5% year over year to $666.4 million. Organic sales decreased 1.3%, while currency translations hurt sales by 1.6%. Segment operating earnings were $184.2 million, compared with $200 million a year ago. Operating margin contracted 160 bps to 27.6% from 29.2% a year ago, primarily due to lower sales and unfavorable mix and currency effects.
Control Products & Solutions: Net sales fell 9.4% to $807.6 million. Organic sales declined 7.5%, while currency translations dented sales by 1.9%. Segment operating earnings dropped 11.8% to $126.8 million from $143.8 million in the year-ago quarter. Operating margin decreased 40 bps to 15.7%.
Financials
As of Jun 30, 2016, cash and cash equivalents were $1,509.3 million, up from $1,427.3 million as of Sep 30, 2015. As of Jun 30, 2016, long-term debt was $1,521.8 million, up from $1,500.9 million as of Sep 30, 2015.
Cash flow from operations came in at $675.3 million for the nine-month period ended Jun 30, 2016 compared with $839.7 million in the comparable year-ago period. Return on invested capital was 32.6% as of Jun 30, 2016, decreased from 33.1% in the year-ago quarter.
During the reported quarter, Rockwell Automation repurchased 1.1million of its shares for $121.7 million. As of Jun 30, 2016, $1,075.2 million was available under the existing share repurchase authorization.
ROCKWELL AUTOMT Price, Consensus and EPS Surprise
ROCKWELL AUTOMT Price, Consensus and EPS Surprise | ROCKWELL AUTOMT Quote
Guidance
Rockwell Automation revised its fiscal 2016 adjusted EPS guidance to $5.80–$6.00 from the previous range of $5.75–$6.15. The company expects revenue to shrink 7% for the full year, which includes a currency headwind of about 3% and an organic sales decline of 4%.
Rockwell Automation reduced fiscal 2016 sales outlook due to weaker-than-expected orders and sales performance in its solutions and services businesses in the third quarter. Nevertheless, the company believes sequential sales improvement in the second half of the fiscal year, but not as much as anticipated in April.
The company remains confident about its long-term growth prospects through investments in innovation, domain expertise and commercial resources. In mixed-market conditions, it expects consistent improvement in product sales.
Milwaukee-based Rockwell Automation is a leading global provider of industrial automation equipment, application-specific integrated software and consulting design services. It also offers industrial automation power, control and information solutions.
Currently, Rockwell holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Allegion Plc (ALLE - Free Report) , Columbus McKinnon Corp. (CMCO - Free Report) and Cintas Corp. (CTAS - Free Report) . All the three stocks carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>