Rockwell Automation Inc. (ROK Quick QuoteROK - Free Report) has reported adjusted earnings per share (EPS) of $3.01 in third-quarter fiscal 2023 (ended Jun 30, 2023), missing the Zacks Consensus Estimate of $3.19. However, the bottom line improved 13.2% year over year on higher sales.

Including other one-time items, earnings were $3.45 per share in the fiscal third quarter compared with the prior-year quarter’s $2.55.

Total revenues were $2,239 million, up 13.7% from the prior-year quarter. The top line missed the Zacks Consensus Estimate of $2,295 million. Organic sales in the quarter were up 13.2%, surpassing our prediction of 10.5% organic sales growth. Acquisitions contributed 1.2% to sales growth, while currency translation had a negative impact of 0.7%. We expected acquisitions to contribute 1.2% and currency translation to have a negative impact of 0.2%.

Operational Update

The cost of sales increased 13.5% year over year to around $1,323 million. The gross profit rose 14.1% year over year to $915 million. Selling, general and administrative expenses moved up 13.3% year over year to $501 million.

Consolidated segmental operating income totaled $473 million, up 15.6% from the prior-year quarter. The total segment operating margin was 21.1% in the fiscal third quarter, higher than the prior-year period’s 20.8%. The improvement in margins was driven by positive price/costs and higher sales volume, partially negated by higher investment spending and incentive compensation.

Segmental Results

Intelligent Devices: Net sales amounted to $968 million in the fiscal third quarter, up 10.2% year over year. The reported figure missed our estimate of $996 million. The segment’s operating earnings totaled $163 million compared with the year-earlier quarter’s $173 million. We predicted the segment operating earnings to be $210.7 million in the quarter. The variance was mainly due to higher investment spend, unfavorable mix and higher incentive compensation. The segmental operating margin decreased to 16.8% in the quarter compared with the year-ago quarter’s 19.7%.

Software & Control: Net sales climbed 23.7% year over year to $751 million in the reported quarter. Reported sales surpassed our estimate of $691 million. The segment’s operating earnings increased 37.2% year over year to $262 million. We predicted segment operating earnings of $201.8 million. The variance was due to higher sales volume in the quarter. The segment’s operating margin was 34.8% compared with 31.4% in the year-earlier quarter.

Lifecycle Services: Net sales for the segment were $520 million in the reported quarter, up 7.5% year over year. We projected the segment’s sales to be $515 million in the quarter. The segment’s operating earnings totaled $48.4 million compared with the prior-year quarter’s $45.4 million. Our estimate for the segment’s operating earnings was $32.3 million. The segment’s operating margin was 9.3% in the reported quarter compared with the year-earlier quarter’s 9.4%.

Financials

At the end of third-quarter fiscal 2023, cash and cash equivalents were approximately $444 million compared with $491 million as of the end of fiscal 2022. The long-term debt was $2,987 million at the end of the reported quarter, down from $3,168 million at the third-quarter fiscal 2022 end.

Cash flow from operations through the nine months ended Jun 30, 2023, was $535 million compared with the prior-year period’s $424 million. Return on invested capital was 20.9% as of Jun 30, 2023.

In the quarter under review, ROK repurchased 0.2 million shares for $61.8 million. As of the end of the quarter, $1 billion was available under the existing share-repurchase authorization.

FY23 Guidance

Backed by the solid backlog levels and performance in the first nine months of fiscal 2023, as well as improvement in the availability of electronic components, Rockwell Automation updated its reported sales growth guidance to 14-16% for fiscal 2023. This marks an increase from prior-stated growth of 12.5-16.5%. The organic growth sales guidance has been updated to 14-16% from the previously stated 13-17%. Adjusted earnings per share are expected between $11.70 and $12.10, updated from the $11.50-$12.20 mentioned earlier.

Price Performance

In the past year, Rockwell Automation’s shares have gained 21.8% compared with the industry’s growth of 20.3%.

Image Source: Zacks Investment Research

Zacks Rank & Stocks to Consider

Rockwell Automation currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. (WOR Quick QuoteWOR - Free Report) , Astec Industries, Inc. (ASTE Quick QuoteASTE - Free Report) and AGCO Corporation (AGCO Quick QuoteAGCO - Free Report) . WOR and ASTE sport a Zacks Rank #1 (Strong Buy) at present, and AGCO has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $5.65 per share. The consensus estimate for 2023 earnings has moved north by 22.6% in the past 60 days. Its shares gained 32.8% in the last year.

Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares gained 25.1% in the last year.

The Zacks Consensus Estimate for AGCO Corporation’s 2023 earnings per share is pegged at $15.07. The consensus estimate for 2023 earnings has moved 3% north in the past 60 days. It has a trailing four-quarter average earnings surprise of 16.4%. AGCO gained 20% in the last year.

(We are reissuing this article to correct a mistake. The original article, issued on August 1, 2023, should no longer be relied upon.)