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Rockwell Automation, Inc. (ROK - Analyst Report) reported second quarter fiscal 2013 adjusted earnings of $1.33 per share, up 11% from $1.20 per share earned in the prior-year quarter. The results beat the Zacks Consensus Estimate of $1.30.

Earnings exclude net effect of non-operating pension costs and their related tax effect of 9 cents per share in the reported quarter and 4 cents in the year ago quarter. Including this, earnings from continuing operations were $1.24 per share compared with the prior-year quarter’s earnings of $1.16.

Operational Update

Total revenues were $1.533 billion in the reported quarter, down 2% year over year. The results missed the Zacks Consensus Estimate of $1.594 billion.

Cost of sales decreased 4% year over year to $906 million in the quarter. Gross profit remained flat at $616 million compared with the year-ago quarter. Gross margin expanded 90 basis points (bps) year over year to 40.5% in the quarter.

Selling, general and administrative expenses declined 1% to $377 million from the prior-year quarter. Segment operating income was $285 million in the quarter compared with $276 million in the second quarter of 2012. Operating margin expanded 100 basis points year over year to 18.7%.

Segment Results

Architecture & Software: Net sales for the segment went down 4% to $639 million in the quarter. Organic sales decreased 3%. Segment operating earnings in the reported quarter were $169.9 million compared with $170.6 million in the year-ago quarter. Segment operating margin increased to 26.6% from 25.7% a year ago.

Control Products & Solutions: Net sales decreased 1% to $883.6 million in the quarter. Segment operating earnings in the reported quarter inched up 9% to $115.3 million. Segment operating margin in the quarter expanded 120 (bps) year over year to 13%.


Rockwell Automation had cash and cash equivalents of $967.1 million as of Mar 31, 2013, compared with $903.9 million as of Sep 30, 2012. Total debt was $1.14 billion as of Mar 31, 2013 compared with $1.06 billion as of Sep 30, 2012.

The debt-to-capitalization ratio was 36.1% as of Mar 31, 2013, flat compared with Sep 30, 2012. In the second quarter of fiscal 2013, the company generated a cash flow from operating activities of $370 million compared with $64.5 million in the prior-year quarter. Return on invested capital was 29.8% as of Mar 31, 2013 compared with 30.5% as of Mar 31, 2012.

Share Repurchase

During the reported quarter, Rockwell Automation repurchased 1.4 million shares for $125.9 million. As of Mar 31, 2013, the company had $723 million worth of shares remaining under the $1 billion share repurchase authorization.


Rockwell Automation lowered its sales guidance to the range of $6.25 to $6.45 billion for fiscal 2013 from the previous range of $6.35 to $6.65 billion. Outlook for earnings per share was also revised to a new band of $5.40 to $5.70 per share from the previous range of $5.35 to $5.75 per share.

Our View

Rockwell Automation will benefit from its expansion in the emerging markets, investment in Logix and its recent acquisition of China-based medium voltage drives business. However, uncertainty in the global economic scenario, which can lead to cautious capital-spending, further deterioration in the Chinese economy and margin headwinds in the form of increased growth spending remain concerns. Rockwell currently retains a short-term Zacks Rank #3 (Hold).

Based in Milwaukee, Wisconsin, Rockwell Automation is an original equipment manufacturer (OEM) of industrial automation equipment, application specific integrated software and consulting design services. Rockwell’s peers in the same industry are HollySys Automation Technologies, Ltd. (HOLI - Snapshot Report), iRobot Corporation (IRBT - Analyst Report) and ECOtality, Inc. .

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Company Symbol Price %Chg
SUPER MICRO… SMCI 27.00 +10.25%
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CENTURY ALU… CENX 26.97 +7.97%
WILLDAN GRO… WLDN 11.38 +5.86%