Back to top

Image: Bigstock

Rockwell Automation (ROK) Down 6.1% Since Last Earnings Report: Can It Rebound?

Read MoreHide Full Article

A month has gone by since the last earnings report for Rockwell Automation (ROK - Free Report) . Shares have lost about 6.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Rockwell Automation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Rockwell Automation Beats Q3 Earnings, Hikes Outlook
 
Rockwell Automation delivered adjusted earnings per share of $2.16 in third-quarter fiscal 2018 (ended Jun 30, 2018), up 23% from the prior-year quarter figure of $1.76. The year-over-year performance was driven by elevated sales. Earnings also surpassed the Zacks Consensus Estimate of $2.03.
 
Including one-time items, the company reported earnings of $1.587 per share, compared with earnings of $1.67 per share in the year-ago quarter.
 
Total revenues came in at $1,699 million in the quarter, up 6% year over year but came in line with the Zacks Consensus Estimate. Organic sales rose 5.7%. Foreign currency translations bolstered sales by 1.8%, while divestitures in the prior year reduced sales by 1.3%.
 
Operational Update
 
Cost of sales increased 4% year over year to $957 million. Gross profit went up 9% to $742 million from $678 million reported in the year-ago quarter. Selling, general and administrative expenses increased 4% to $402 million.
Consolidated segment operating income was $383 million, up 14% from $337 million recorded in the prior-year quarter. Segment operating margin was 22.5% in the reported quarter, an expansion of 140 bps from the year-earlier quarter due to higher sales.
 
Segment Results
 
Architecture & Software: Net sales rose 9% year over year to $7968 million in the third quarter. Organic sales were up 6.7% and currency translation bolstered sales by 2%. Segment operating earnings were $2398 million compared with $204 million recorded in the prior year. Segment operating margin was 30.0% compared with 27.9% witnessed in the year-ago quarter.
Control Products & Solutions: Net sales climbed 4% to $903 million in the reported quarter. Organic sales increased 4.9%, currency translation improved sales by 1.6%, and the prior-year divestiture reduced sales by 2.4%. Segment operating earnings increased 8% to $144 million from $133 million in the year-ago quarter. Segment operating margin came in at 15.9% compared with 15.3% recorded in the prior-year quarter.
 
Financials
 
As of Jun 30, 2018, cash and cash equivalents were $940 million, down from $1,411 million as of Sep 30, 2017. As of Jun 30, 2018, total debt was $1,228 million, down from $1,844 million as of Sep 30, 2017.
 
Cash flow from operations came in at $937 million in the nine-month period ended Jun 30, 2018 compared with $927 million in the year-ago quarter. Return on invested capital was 43.8% as of Jun 30, 2018, up from 38.8% as of Jun 30, 2017.
 
During the fiscal third quarter, Rockwell Automation repurchased 2.5 million shares for $431 million. As of Jun 30, 2018, $5048 million remained available for repurchase.
 
Guidance
 
Backed by favorable global manufacturing environment, positive macroeconomic indicators growing backlog, Rockwell Automation raised adjusted EPS guidance to $7.90-$8.10 from the prior $7.70-$8.00. It also hiked fiscal 2018 organic sales growth guidance to about 5.5% and projects fiscal 2018 reported sales to be about $6.7 billion.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Rockwell Automation has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

Rockwell Automation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Rockwell Automation, Inc. (ROK) - free report >>

Published in