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Rockwell Automation Shares Up 15% YTD: What's Driving it?
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Shares of Rockwell Automation, Inc. (ROK - Free Report) have gained 15.1% year to date compared with the industry’s growth of 14.8% and the S&P 500’s 8.9%. Solid order levels in some end markets fueled by the pandemic, expected benefits from cost-saving actions and acquisitions have contributed to this rally.
The company has a market capitalization of $27 billion. Rockwell Automation has an expected long-term earnings per share growth rate of 5.6%.
Rockwell Automation has outpaced the Zacks Consensus Estimate in three of the trailing four quarters and met the same in the remaining one. It has a trailing four-quarter average positive earnings surprise of 12.47%.
Let’s delve deeper and analyze the factors driving the stock.
Driving Factors
The company falls under essential business to support critical infrastructure. Its global manufacturing facilities and distribution centers have remained operational during the pandemic. The company has been supporting a few pharmaceutical and medical device companies to scale up their production of critical products and testing capacity during the current crisis. Moreover, demand for packaged food and beverages is spiking on travel restrictions imposed by governments around the world. Around 70% of Rockwell Automation's Food & Beverage business revenues are dependent on grocery stores and home delivery, which remains strong amid the pandemic.
Rockwell Automation had been witnessing an increase in order levels. The company has raised fiscal 2020 adjusted earnings per share guidance to the band of $7.40-$7.60 from its prior estimate of $6.90-$7.70. The Zacks Consensus Estimate for fiscal 2020 earnings per share is pegged at $7.53. The company’s guidance is based on the premise of a gradual recovery, with no increase in pandemic-related facility closures or disruptions to the supply chain.
Rockwell Automation has been taking preemptive actions to align the company’s cost structure with this uncertain environment. The company is trying to minimize workforce reductions. There will be no incentive compensation payouts for fiscal 2020. It is cutting down discretionary spending across the organization and introducing other temporary cost actions that will be effective across its locations by the beginning of May. Rockwell Automation also intends to cut salaries. These actions are expected to generate $150 million of savings in fiscal 2020.
Further, Rockwell Automation’s acquisition strategy continues to stoke growth. In October 2019, the company acquired MESTECH Services, a global provider of Manufacturing Execution Systems/Manufacturing Operations Management, digital solutions consulting and systems integration services. The acquisition enhances the company’s capabilities to profitably grow Information Solutions and Connected Services globally and accelerate its ability to help customers execute digital transformation initiatives.
In January, the company acquired Avnet Data Security, LTD, in a bid to boost its cybersecurity offerings, which is one of Rockwell Automation’s fastest-growing businesses. This buyout will support the company's strategic objective to achieve double-digit growth in Information Solutions and Connected Services by expanding its IT/OT cyber and network expertise globally. In April, the company completed acquisitions of ASEM, a leading provider of digital automation technologies and Kalypso, a privately-held US-based software delivery and consulting firm specializing in the digital transformation of industrial companies with a strong client base in life sciences, consumer products and industrial high-tech.
Northward Estimate Revisions
The Zacks Consensus Estimate for current-quarter earnings has been revised 7% upward in the past 60 days. Similarly, the Zacks Consensus Estimate for fiscal 2020 earnings has moved up 5% in the past 60 days.
Zacks Rank & Stocks to Consider
Rockwell Automation currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Astec Industries Inc. (ASTE - Free Report) , IIVI Incorporated and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While Astec and IIVI sport a Zacks Rank #1 (Strong Buy), SiteOne carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Astec has a projected earnings growth rate of 13.6% for 2020. The company’s shares have gained 27% so far this year.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 32% year to date.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 39% in the year so far.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Rockwell Automation Shares Up 15% YTD: What's Driving it?
Shares of Rockwell Automation, Inc. (ROK - Free Report) have gained 15.1% year to date compared with the industry’s growth of 14.8% and the S&P 500’s 8.9%. Solid order levels in some end markets fueled by the pandemic, expected benefits from cost-saving actions and acquisitions have contributed to this rally.
The company has a market capitalization of $27 billion. Rockwell Automation has an expected long-term earnings per share growth rate of 5.6%.
Rockwell Automation has outpaced the Zacks Consensus Estimate in three of the trailing four quarters and met the same in the remaining one. It has a trailing four-quarter average positive earnings surprise of 12.47%.
Let’s delve deeper and analyze the factors driving the stock.
Driving Factors
The company falls under essential business to support critical infrastructure. Its global manufacturing facilities and distribution centers have remained operational during the pandemic. The company has been supporting a few pharmaceutical and medical device companies to scale up their production of critical products and testing capacity during the current crisis. Moreover, demand for packaged food and beverages is spiking on travel restrictions imposed by governments around the world. Around 70% of Rockwell Automation's Food & Beverage business revenues are dependent on grocery stores and home delivery, which remains strong amid the pandemic.
Rockwell Automation had been witnessing an increase in order levels. The company has raised fiscal 2020 adjusted earnings per share guidance to the band of $7.40-$7.60 from its prior estimate of $6.90-$7.70. The Zacks Consensus Estimate for fiscal 2020 earnings per share is pegged at $7.53. The company’s guidance is based on the premise of a gradual recovery, with no increase in pandemic-related facility closures or disruptions to the supply chain.
Rockwell Automation has been taking preemptive actions to align the company’s cost structure with this uncertain environment. The company is trying to minimize workforce reductions. There will be no incentive compensation payouts for fiscal 2020. It is cutting down discretionary spending across the organization and introducing other temporary cost actions that will be effective across its locations by the beginning of May. Rockwell Automation also intends to cut salaries. These actions are expected to generate $150 million of savings in fiscal 2020.
Further, Rockwell Automation’s acquisition strategy continues to stoke growth. In October 2019, the company acquired MESTECH Services, a global provider of Manufacturing Execution Systems/Manufacturing Operations Management, digital solutions consulting and systems integration services. The acquisition enhances the company’s capabilities to profitably grow Information Solutions and Connected Services globally and accelerate its ability to help customers execute digital transformation initiatives.
In January, the company acquired Avnet Data Security, LTD, in a bid to boost its cybersecurity offerings, which is one of Rockwell Automation’s fastest-growing businesses. This buyout will support the company's strategic objective to achieve double-digit growth in Information Solutions and Connected Services by expanding its IT/OT cyber and network expertise globally. In April, the company completed acquisitions of ASEM, a leading provider of digital automation technologies and Kalypso, a privately-held US-based software delivery and consulting firm specializing in the digital transformation of industrial companies with a strong client base in life sciences, consumer products and industrial high-tech.
Northward Estimate Revisions
The Zacks Consensus Estimate for current-quarter earnings has been revised 7% upward in the past 60 days. Similarly, the Zacks Consensus Estimate for fiscal 2020 earnings has moved up 5% in the past 60 days.
Zacks Rank & Stocks to Consider
Rockwell Automation currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Astec Industries Inc. (ASTE - Free Report) , IIVI Incorporated and SiteOne Landscape Supply, Inc. (SITE - Free Report) . While Astec and IIVI sport a Zacks Rank #1 (Strong Buy), SiteOne carries a Zacks Rank of 2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Astec has a projected earnings growth rate of 13.6% for 2020. The company’s shares have gained 27% so far this year.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 32% year to date.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 39% in the year so far.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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