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Rockwell Automation (ROK) Lags Q4 Earnings, Issues '18 View

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Rockwell Automation Inc. (ROK - Free Report) reported adjusted earnings per share of $1.69 in fourth-quarter fiscal 2017 (ended Sep 30, 2017), up 11% from $1.52 recorded in the prior-year quarter. The year-over-year performance was driven by higher sales, partially offset by higher investment spending, incentive compensation. However, earnings missed the Zacks Consensus Estimate of $1.72.

Including one-time items, the company’s earnings came in at $1.57 per share, up 9.8% from the year-ago quarter figure of $1.43.

Total revenues came in at $1.67 billion in the quarter, up 8.4% year over year. Revenues also surpassed the Zacks Consensus Estimate of $1.66 billion. Organic sales rose 5.6%, acquisitions contributed 1.3% and foreign currency translations boosted sales by 1.5%.

Rockwell Automation, Inc. Price, Consensus and EPS Surprise

 

Rockwell Automation, Inc. Price, Consensus and EPS Surprise | Rockwell Automation, Inc. Quote

Operational Update

Cost of sales increased 15% year over year to $1,020 million. Gross profit edged down 0.6% to $647.7 million from $651.9 million reported in the year-ago quarter. Selling, general and administrative expenses flared up 5.8% to $425.5 million.

Consolidated segment operating income was $283.5 million, down 7% from $304.3 million recorded in the prior-year quarter. Segment operating margin was 17% in the reported quarter, 280 basis points contraction from the year-earlier quarter due to elevated investment spending and incentive compensation.

Segment Results

Architecture & Software: Net sales rose 8% year over year to $752 million in the fiscal fourth quarter. Organic sales were up 6.2%, acquisitions contributed 0.2% and currency translation increased sales by 1.6%. Segment operating earnings were $178 million compared with $180 million recorded in the prior year. Segment operating margin was 23.7% compared with 25.8% witnessed in the year-ago quarter.

Control Products & Solutions: Net sales climbed 8.7% to $915.5 million in the quarter. Organic sales increased 5.1%, acquisitions contributed 2.2% and currency translation boosted sales by 1.4%. Segment operating earnings dropped 15% to $105.5 million from $124.3 million in the year-ago quarter. Segment operating margin came in at 11.5% compared with 14.8% in the prior-year quarter.

Financials

As of Sep 30, 2017, cash and cash equivalents were $1,411 million, down from $1,526 million as of Sep 30, 2016. As of Sep 30, 2017, total debt was $1,844 million, down from $1,964 million as of Sep 30, 2016.

Cash flow from operations in fiscal 2017 came in at $1,034 million compared with $947.3 million in fiscal 2016. Return on invested capital was 39% as of Sep 30, 2017, increasing from 33% as of Sep 30, 2016.

During the reported quarter, Rockwell Automation repurchased 210,000 of its shares for $34.6 million. As of the quarter end, $608.4 million was available under the existing share-repurchase authorization.

Fiscal 2017 Performance

Rockwell Automation reported adjusted earnings per share of $6.76 in fiscal 2017, up 14% from $5.93 per share recorded in the prior year. Earnings fell short of the Zacks Consensus Estimate of $6.78. Including one-time items, the bottom line came in at $6.35, up 14.2% from $5.56 recorded in fiscal 2016.

Revenues jumped 7.3% year over year to $6.31 billion from $5.88 billion in fiscal 2016. The top line beat the Zacks Consensus Estimate of $6.30 billion.

Guidance

Rockwell Automation issued its fiscal 2018 guidance. For fiscal 2018, the company expects adjusted EPS in the range of $7.20-$7.50 and reported sales growth in the range of 5-8%. Rockwell Automation projects heavy industries to be marginally higher than the company average, with solid contribution from oil and gas. The company also anticipates growth in consumer and transportation sectors.

Its strategic focus on the Connected Enterprise and substantial investments in technology will drive growth. The company is well positioned to benefit from attractive opportunities in the industrial automation and information market.

Share Price Performance

Rockwell Automation's shares have outperformed the industry in the past year. The company’s shares have surged 60.6%, while the industry recorded 55% growth.


Zacks Rank & Other Key Picks

Currently, Rockwell Automation carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the same sector are Caterpillar Inc. (CAT - Free Report) , Fanuc Corp. (FANUY - Free Report) and iRobot Corp. (IRBT - Free Report) . Caterpillar flaunts a Zacks Rank #1 (Strong Buy), while Fanuc and iRobot carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar has an expected long-term growth rate of 10.3%.

Fanuc has an expected long-term growth rate of 11%.

iRobot has an expected long-term growth rate of 20%.

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