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Why Is Rockwell Automation (ROK) Down 2.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Rockwell Automation (ROK - Free Report) . Shares have lost about 2.2% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Rockwell Automation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Rockwell Automation Q4 Earnings Beat Estimates, Up Y/Y

Rockwell Automation reported an adjusted earnings of $2.33 in fourth-quarter fiscal 2021 (ended Sep 30, 2021), beating the Zacks Consensus Estimate of $2.18. The bottom line improved 21% year over year, driven by higher sales and a lower tax rate.

Including one-time items, the company’s earnings was 67 cents per share compared with the year-ago quarter’s $2.25.

Total revenues were $1,808 million, up 15% from the prior-year quarter. However, the top line missed the Zacks Consensus Estimate of $1,884 million. Organic sales in the quarter were up 12.6%, while currency translation had a positive impact of 1.5%. The company reported record quarterly orders of $2.2 billion, which surged 40% year over year.

Operational Update

Cost of sales increased 17% year over year to around $1,088 million. Gross profit climbed 12% year over year to $719 million. Selling, general and administrative expenses flared up 26% year over year to $447 million.

Consolidated segment operating income totaled $323 million, up 1.7% from the prior-year quarter. Total segment operating margin was 17.9% in the fiscal fourth quarter, lower than the prior-year period’s 20.2%. Gain from enhanced sales was negated by higher planned spending, the reinstatement of incentive compensation, and the reversal of temporary pay actions.

Segment Results

Intelligent Devices: Net sales amounted to $857 million during the fiscal fourth quarter, reflecting year-over-year growth of 17%. Segment operating earnings totaled $166 million compared with the year-earlier quarter’s $135 million. Segment operating margin expanded to 19.4% in the quarter compared with the year-ago quarter’s 18.4%.

Software & Control: Net sales climbed 19% year over year to $494 million in the reported quarter. Segment operating earnings increased 5% year over year to $120 million. Segment operating margin was 24.2% compared with 27.5% recorded in the year-earlier quarter.

Lifecycle Services: Net sales for the segment were $457 million in the reported quarter, reflecting year-over-year growth of 9%. Segment operating earnings totaled $37 million, indicating a plunge of 46% from the prior-year quarter. Segment operating margin was 8.1% in the reported quarter compared with the year-earlier quarter’s 16.3%.

Financials

As of the end of fiscal 2021, cash and cash equivalents were around $662 million compared with $705 million as of the end of fiscal 2020. As of Sep 30, 2021, total debt was around $3.97 billion compared with $2 billion as of Sep 30, 2020.

Cash flow from operations during the fiscal 2021 was $1.26 billion compared with the prior-year’s $1.12 billion. Return on invested capital was 30.7% as of Sep 30, 2021.

During fiscal 2021, Rockwell Automation repurchased 1.1 million shares for $301.4 million. As of the end of fiscal 2021, $552.3 million was available under the existing share-repurchase authorization.

Fiscal 2021 Performance

For fiscal 2021, Rockwell Automation’s adjusted earnings was $9.43, which surpassed the Zacks Consensus Estimate of $9.28. It was 20% higher than the prior fiscal. Including one-time items, the company’s earnings were $11.58 per share compared with $8.77 in fiscal 2020.

Total revenues advanced 10.5% year over year to around $6,997 million, which missed the Zacks Consensus Estimate of $7,077 million.

Fiscal 2022 Guidance

Reflecting strong demand and record backlog, Rockwell Automation expects reported sales growth at 16-19% for fiscal 2022. Organic sales growth is projected at 14-17%. Adjusted earnings per share guidance for fiscal 2022 is expected to be $10.50-$11.10.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -17.97% due to these changes.

VGM Scores

At this time, Rockwell Automation has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Rockwell Automation has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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