Rockwell Auto Expands in Brazil

Rockwell Automation Inc. (ROK - Analyst Report) is set to double its manufacturing capacity in Brazil with the construction of a new manufacturing plant in Jundiai city near Sao Paulo, Brazil.

The plant is slated to start production by the end of 2012 summer. New products like Allen-Bradley medium-voltage and low-voltage drives, which are used in oil and gas, and mining industries, will be produced.

Rockwell Automation’s current manufacturing plant in Sao Paulo produces ControlLogix, industrial controls, motor control centers and customer control panels.

The oil and gas and mining industries invest in large projects that require significant capital investments, thus providing growth opportunities for Rockwell Automation in the region.

We believe Rockwell Automation is well positioned for long-term growth based on its strong global market presence. The company is focused on expanding its global footprint in the emerging markets, as it expects automation growth rates there to be 50% higher than growth rates in developed countries.

Management believes that increased demand for consumer products in these markets will drive investments in manufacturing providing the company with additional growth opportunities. The company has a long-term goal of deriving 30% of its total revenue from emerging markets. This is key to meeting the company’s target of generating 60% of its revenue from outside the U.S. by 2013.

On the flipside, slowdown in acquisitions and increase in raw material prices may lead to sluggish growth. The company retains a Zacks #3 Rank on its stock, which implies a Hold recommendation for the short term. We also maintain our Neutral recommendation on the stock.

Based in Milwaukee, Wisconsin, Rockwell Automation Inc. is a global provider of industrial automation power, control, and information products and services. The company competes with ABB Ltd. (ABB - Snapshot Report), Emerson Electric Co. (EMR - Analyst Report) and Siemens AG (SI - Analyst Report).

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