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Rockwell Automation (ROK - Analyst Report) has entered into a partnership with Terepac Corp, the manufacturer of the world’s tiniest digital electronics. Terepac will be producing high volumes of its proprietary micro circuits supporting the "Internet of Things" with radio frequency identification (RFID) tags.
Per the agreement, Rockwell will fortify Terepac’s infrastructure, allowing it to miniaturize extensively more circuits than its current capability.
Based in Waterloo, Ontario, Terepac is a pioneer in the promising field of “Internet of Things”. The company’s technologies enable sophisticated microelectronics to be printed on flexible substrates at a fraction of the size and cost of conventional method.
The entire devices with microprocessors, memory, and sensors can be reduced to less than a millimeter square in size without making any compromise with quality performance.
Rockwell intends to expand in the lines of advanced technologies that are transforming the competitive landscape worldwide. With this move, Rockwell will be helping in taking the innovative technology and advanced microelectronics to its next level, augmenting its own product portfolio.
Recently, the company has hiked its dividend by 11% to 47 cents per share to be paid on September 10, 2012, to stockholders of record as of August 13, 2012. Moreover, it has approved the addition of $1 billion to its share repurchase program. This is in addition to the previous buy-back authorization of $1 billion, of which, the company had $51 million remaining as of June 7, 2012.
Rockwell’s commitment towards increasing shareholders’ return reflects its free cash flow generating capability and a strong balance sheet. Further, the company expects to repurchase nearly 3 million shares for the balance of the year.
However, Rockwell faces severe challenges from the macroeconomic conditions, including the conditions prevailing in the U.S. and Europe. As a result, it has narrowed its earnings guidance to the range of $5.10-$5.40 per share versus the previous target of $5.05-$5.45. Revenues are also narrowed to the range of $6.25-$6.45 billion from $6.2-$6.5 billion.
Moreover, currency also remains a headwind and the company expects currency translation to reduce sales by two percentage points. Rockwell also faces tough competition from companies like ABB Ltd. (ABB - Snapshot Report) and Siemens AG (SI - Analyst Report).
Currently, Rockwell retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on the stock.
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