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Rockwell Automation (ROK) Q2 Earnings Top Estimates, Decline Y/Y
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Rockwell Automation Inc. (ROK - Free Report) reported adjusted earnings per share (EPS) of $2.50 in second-quarter fiscal 2024 (ended Mar 31, 2024), surpassing the Zacks Consensus Estimate of $2.15. The bottom line declined 17% year over year, primarily attributed to lower sales volume and operating margins in the Intelligent Devices, and Software & Control segments. This was somewhat offset by the improved performance of the Lifecycle Services segment.
Including one-time items, earnings were $2.31 per share compared with $2.59 in the year-ago quarter.
Total revenues were $2.13 billion, down 6.6% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $2.04 billion. Organic sales were down 8.1%. We had projected a 12.2% decline in organic sales. The variance was mainly due to the better-than-expected performance in the Lifecycle Services segment.
Acquisitions contributed 1.4% to sales growth while currency translation contributed 0.1%. We expected acquisitions and currency translation to contribute 1.5% and 0.9%, respectively.
Rockwell Automation, Inc. Price, Consensus and EPS Surprise
The cost of sales declined 3.7% year over year to around $1.29 billion. The gross profit declined 11% to $833 million. Selling, general and administrative expenses were flat year over year at $501 million.
Consolidated segment operating income totaled $404 million, down 16.5% from the prior-year quarter. The total segment operating margin was 19% in the fiscal second quarter, lower than the prior-year period’s 21.3%. Lower sales volume, partially offset by lower incentive compensation, led to the downfall in margins.
Segment Results
Intelligent Devices: Net sales amounted to $974 million, down 5% year over year. The reported figure beat our estimate of $936 million.
The segment’s operating earnings totaled $161 million compared with the year-earlier quarter’s $207 million. We predicted the segment operating earnings to be $145 million. The segment’s operating margin decreased to 16.5% from the year-ago quarter’s 20.2% due to lower sales volume and unfavorable mix, partially offset by lower incentive compensation.
Software & Control: Net sales slumped 23% year over year to $570 million. Reported sales missed our estimate of $668 million.
The segment’s operating earnings plunged 41% year over year to $146 million. We predicted segmental operating earnings of $181 million. The segment’s operating margin was 25.7% compared with 33.6% in the year-earlier quarter, reflecting the impact of reduced sales volume partially offset by lower incentive compensation, positive price/cost and favorable mix.
Lifecycle Services: Net sales for the segment were $583 million, up 14% year over year. We had projected the segment’s sales at $448 million.
The segment’s operating earnings totaled $97 million compared with the year-ago quarter’s $28 million. Our estimate for the segment’s operating earnings was $29.5 million. The variance was mainly due to the improvement in volumes witnessed in the quarter.
The segment’s operating margin was 16.6% compared with the year-ago quarter’s 5.5%. The improvement was driven by higher sales volume, lower incentive compensation and higher margins in Sensia.
Cash Position & Balance Sheet Updates
At the end of the second quarter of fiscal 2024, cash and cash equivalents were approximately $0.47 billion compared with $1.07 billion as of the end of fiscal 2023. Cash flow from operations was $120 million compared with the year-ago quarter’s $187 million. Return on invested capital was 18% as of Mar 31, 2024.
ROK’s long-term debt was $2.86 million at the end of the quarter, flat compared with the fiscal 2023 end.
ROK repurchased 0.7 million shares for $195 million. As of the end of the quarter, $0.6 billion was available under the existing share-repurchase authorization.
FY24 Guidance
Citing excess inventory buildup with customers, Rockwell Automation does not anticipate a ramp-up in order levels in fiscal 2024. ROK currently expects adjusted EPS in the range of $10.00 - $11.00, much lower than the earlier stated range of $12.00-$13.50.
The company expects to report a decline in sales ranging from 4% to 6%. ROK had earlier projected year-over-year sales growth in the range of 0.5% to 6.5%. Organic sales are anticipated to decline in the band of 6-8%. The earlier projection for organic sales growth was a range of negative 2.0% to positive 4.0%.
CFO Transition
Rockwell Automation declared that Nicholas Gangestad, currently serving as Senior Vice President and Chief Financial Officer, will be retiring. The company has initiated the process of finding his replacement, and until the new CFO is selected, Nicholas will remain in his current role.
Price Performance
In the past year, Rockwell Automation’s shares have dipped 1.3% compared with the industry’s 2.5% decline.
Image Source: Zacks Investment Research
Zacks Rank
Rockwell Automation currently carries a Zacks Rank #4 (Sell).
Xylem Inc. (XYL - Free Report) reported first-quarter adjusted earnings of 90 cents per share, which surpassed the Zacks Consensus Estimate of 84 cents. The bottom line increased 14% year over year.
XYL’s revenues of $2.03 billion outperformed the consensus estimate of $2.00 billion. The top line jumped 40% year over year, driven by strong commercial and operational execution, and resilient demand. Organic sales in the quarter rose 7%.
Ingersoll Rand Inc. (IR - Free Report) posted first-quarter adjusted earnings of 78 cents per share, surpassing the Zacks Consensus Estimate of 69 cents. The bottom line increased 20% year over year.
Total revenues of $1.67 billion lagged the consensus estimate of $1.70 billion. However, the top line increased 2.5% year over year. Acquisitions contributed 3.4% to revenues, while organic revenues declined 0.8% and foreign currency movements had a negative impact of 0.1%.
W.W. Grainger, Inc. (GWW - Free Report) reported EPS of $9.62 in second-quarter 2024, beating the Zacks Consensus Estimate of $9.58. The bottom line improved 0.1% year over year.
Grainger’s quarterly revenues rose 3.5% year over year to $4.24 billion. The top line missed the consensus estimate of $4.27 billion.
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Rockwell Automation (ROK) Q2 Earnings Top Estimates, Decline Y/Y
Rockwell Automation Inc. (ROK - Free Report) reported adjusted earnings per share (EPS) of $2.50 in second-quarter fiscal 2024 (ended Mar 31, 2024), surpassing the Zacks Consensus Estimate of $2.15. The bottom line declined 17% year over year, primarily attributed to lower sales volume and operating margins in the Intelligent Devices, and Software & Control segments. This was somewhat offset by the improved performance of the Lifecycle Services segment.
Including one-time items, earnings were $2.31 per share compared with $2.59 in the year-ago quarter.
Total revenues were $2.13 billion, down 6.6% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $2.04 billion. Organic sales were down 8.1%. We had projected a 12.2% decline in organic sales. The variance was mainly due to the better-than-expected performance in the Lifecycle Services segment.
Acquisitions contributed 1.4% to sales growth while currency translation contributed 0.1%. We expected acquisitions and currency translation to contribute 1.5% and 0.9%, respectively.
Rockwell Automation, Inc. Price, Consensus and EPS Surprise
Rockwell Automation, Inc. price-consensus-eps-surprise-chart | Rockwell Automation, Inc. Quote
Operational Update
The cost of sales declined 3.7% year over year to around $1.29 billion. The gross profit declined 11% to $833 million. Selling, general and administrative expenses were flat year over year at $501 million.
Consolidated segment operating income totaled $404 million, down 16.5% from the prior-year quarter. The total segment operating margin was 19% in the fiscal second quarter, lower than the prior-year period’s 21.3%. Lower sales volume, partially offset by lower incentive compensation, led to the downfall in margins.
Segment Results
Intelligent Devices: Net sales amounted to $974 million, down 5% year over year. The reported figure beat our estimate of $936 million.
The segment’s operating earnings totaled $161 million compared with the year-earlier quarter’s $207 million. We predicted the segment operating earnings to be $145 million. The segment’s operating margin decreased to 16.5% from the year-ago quarter’s 20.2% due to lower sales volume and unfavorable mix, partially offset by lower incentive compensation.
Software & Control: Net sales slumped 23% year over year to $570 million. Reported sales missed our estimate of $668 million.
The segment’s operating earnings plunged 41% year over year to $146 million. We predicted segmental operating earnings of $181 million. The segment’s operating margin was 25.7% compared with 33.6% in the year-earlier quarter, reflecting the impact of reduced sales volume partially offset by lower incentive compensation, positive price/cost and favorable mix.
Lifecycle Services: Net sales for the segment were $583 million, up 14% year over year. We had projected the segment’s sales at $448 million.
The segment’s operating earnings totaled $97 million compared with the year-ago quarter’s $28 million. Our estimate for the segment’s operating earnings was $29.5 million. The variance was mainly due to the improvement in volumes witnessed in the quarter.
The segment’s operating margin was 16.6% compared with the year-ago quarter’s 5.5%. The improvement was driven by higher sales volume, lower incentive compensation and higher margins in Sensia.
Cash Position & Balance Sheet Updates
At the end of the second quarter of fiscal 2024, cash and cash equivalents were approximately $0.47 billion compared with $1.07 billion as of the end of fiscal 2023. Cash flow from operations was $120 million compared with the year-ago quarter’s $187 million. Return on invested capital was 18% as of Mar 31, 2024.
ROK’s long-term debt was $2.86 million at the end of the quarter, flat compared with the fiscal 2023 end.
ROK repurchased 0.7 million shares for $195 million. As of the end of the quarter, $0.6 billion was available under the existing share-repurchase authorization.
FY24 Guidance
Citing excess inventory buildup with customers, Rockwell Automation does not anticipate a ramp-up in order levels in fiscal 2024. ROK currently expects adjusted EPS in the range of $10.00 - $11.00, much lower than the earlier stated range of $12.00-$13.50.
The company expects to report a decline in sales ranging from 4% to 6%. ROK had earlier projected year-over-year sales growth in the range of 0.5% to 6.5%. Organic sales are anticipated to decline in the band of 6-8%. The earlier projection for organic sales growth was a range of negative 2.0% to positive 4.0%.
CFO Transition
Rockwell Automation declared that Nicholas Gangestad, currently serving as Senior Vice President and Chief Financial Officer, will be retiring. The company has initiated the process of finding his replacement, and until the new CFO is selected, Nicholas will remain in his current role.
Price Performance
In the past year, Rockwell Automation’s shares have dipped 1.3% compared with the industry’s 2.5% decline.
Image Source: Zacks Investment Research
Zacks Rank
Rockwell Automation currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Performances of Other Industrial Companies
Xylem Inc. (XYL - Free Report) reported first-quarter adjusted earnings of 90 cents per share, which surpassed the Zacks Consensus Estimate of 84 cents. The bottom line increased 14% year over year.
XYL’s revenues of $2.03 billion outperformed the consensus estimate of $2.00 billion. The top line jumped 40% year over year, driven by strong commercial and operational execution, and resilient demand. Organic sales in the quarter rose 7%.
Ingersoll Rand Inc. (IR - Free Report) posted first-quarter adjusted earnings of 78 cents per share, surpassing the Zacks Consensus Estimate of 69 cents. The bottom line increased 20% year over year.
Total revenues of $1.67 billion lagged the consensus estimate of $1.70 billion. However, the top line increased 2.5% year over year. Acquisitions contributed 3.4% to revenues, while organic revenues declined 0.8% and foreign currency movements had a negative impact of 0.1%.
W.W. Grainger, Inc. (GWW - Free Report) reported EPS of $9.62 in second-quarter 2024, beating the Zacks Consensus Estimate of $9.58. The bottom line improved 0.1% year over year.
Grainger’s quarterly revenues rose 3.5% year over year to $4.24 billion. The top line missed the consensus estimate of $4.27 billion.