It has been about a month since the last earnings report for Rockwell Automation (
ROK Quick Quote ROK - Free Report) . Shares have lost about 2.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Rockwell Automation Q2 Earnings & Sales Miss Estimates
Rockwell Automation reported adjusted EPS of $1.66 in second-quarter fiscal 2022 (ended Mar 31, 2022), missing the Zacks Consensus Estimate of $2.27. Compared with earnings of $2.41 reported in the year-ago quarter, the bottom line declined 31% year over year due to higher input costs and higher investment expenses, partly offset by lower incentive compensation and improved price realization.
Including other one-time items, earnings came in at 46 cents per share in the fiscal second quarter compared with the prior-year quarter’s $3.54 per share. Total revenues were $1,808 million, up 2% from the prior-year quarter. The top line missed the Zacks Consensus Estimate of $1,947 million. Organic sales in the quarter were up 1.3%. Acquisitions contributed 2.3% to sales growth, while currency translation had a negative impact of 1.8%. Total orders were up 37% year on year. Operational Update
Cost of sales increased 13% year over year to around $1,144 million. Gross profit fell 13% year over year to $664 million. Selling, general and administrative expenses moved up 1.7% year over year to $429 million.
Consolidated segment operating income totaled $283 million, down 27% from the prior-year quarter. The total segment operating margin was 15.7% in the fiscal second quarter, lower than the prior-year period’s 22%. Segment Results
Intelligent Devices: Net sales amounted to $809 million during the fiscal second quarter, down 5% year over year. Segment operating earnings totaled $118 million compared with the year-earlier quarter’s $202 million. Segment operating margin decreased to 14.6% in the quarter compared with the year-ago quarter’s 23.8%.
Software & Control: Net sales climbed 6.5% year over year to $535 million in the reported quarter. Segment operating earnings dropped 1.4% year over year to $132 million. Segment operating margin was 24.6% compared with 29.8% in the year-earlier quarter. Lifecycle Services: Net sales for the segment were $465 million in the reported quarter, up 9.7% year over year. Segment operating earnings totaled $33.7 million compared with the prior-year quarter’s $38.3 million. Segment operating margin was 7.3% in the reported quarter compared with the year-earlier quarter’s 9%. Financials
As of the end of the second quarter of fiscal 2022, cash and cash equivalents were around $443 million compared with $662 million as of the end of fiscal 2021. Total debt was around $4.1 billion at the end of the fiscal second quarter compared with $3.9 billion at the fiscal 2021-end.
Cash flow from operations as of the six months period ended on Mar 31, 2022, was $79 million compared with the prior-year quarter’s $595 million. Return on invested capital was 13.2% as of Mar 31, 2022. During the quarter under review, there were no share repurchases. As of the end of the quarter, $503 million was available under the existing share-repurchase authorization. Recently, the company’s board authorized an additional $1 billion for share repurchase. Fiscal 2022 Guidance
Reflecting strong demand and record backlog, Rockwell Automation expects reported sales growth at 11-15% for fiscal 2022. Organic sales growth is projected at 10-14%. Adjusted earnings per share guidance for fiscal 2022 is expected to be $9.20-$9.80.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -17.37% due to these changes.
Currently, Rockwell Automation has a poor Growth Score of F, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Rockwell Automation has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.