Rockwell Automation Inc. (ROK Quick QuoteROK - Free Report) reported adjusted earnings per share (EPS) of $2.04 in first-quarter fiscal 2024 (ended Dec 31, 2023), missing the Zacks Consensus Estimate of earnings of $2.62 per share. The bottom line declined 17% year over year, mainly due to lower operating margins in the Intelligent Devices and Software & Control segments.

Including other one-time items, earnings were $1.86 per share in the quarter compared with the year-ago quarter’s earnings of $3.31 per share.

Total revenues were $2.05 billion, up 3.6% from the prior-year quarter. The top line missed the Zacks Consensus Estimate of $2.62 billion. Organic sales in the quarter were up 1%, in line with our estimate. Acquisitions contributed 1.4% to sales growth, while currency translation contributed 1.2%. We expected acquisitions to contribute 1.2% and currency translation to contribute 2%.

Operational Update

The cost of sales increased 7.7% year over year to around $1.26 billion. The gross profit declined 2.3% year over year to $795 million. Selling, general and administrative expenses increased 9.4% year over year to $514 million.

Consolidated segmental operating income totaled $355.5 million, down 11% from the prior-year quarter. The total segment operating margin was 17.3% in the fiscal first quarter, lower than the prior-year period’s 20.2%. The decline in margins was due to higher investment spending, a mix between products and solutions, and lower supply-chain utilization.

Segment Results

Intelligent Devices: Net sales amounted to $927 million in the fiscal first quarter, down 1% year over year. The reported figure missed our estimate of $989 million. The segment’s operating earnings totaled $150 million compared with the year-earlier quarter’s $209 million. We predicted the segment operating earnings to be $207.5 million in the quarter. The segment’s operating margin decreased to 16.2% in the quarter from the year-ago quarter’s 22.4% due to lower sales volume, the timing of prior-year investment spending and the impact of acquisitions partially offset by positive price/cost.

Software & Control: Net sales rose 5% year over year to $604 million in the reported quarter. Reported sales surpassed our estimate of $588.6 million. The segment’s operating earnings decreased 10% year over year to $151 million. We predicted segmental operating earnings of $190 million. The segment’s operating margin was 25.0% compared with 29.2% in the year-earlier quarter, reflecting the timing of prior-year investment spending and lower supply-chain utilization partially offset by positive price/cost.

Lifecycle Services: Net sales for the segment were $521 million in the reported quarter, up 10.5% year over year. We projected the segment’s sales to be $487.9 million in the quarter. The segment’s operating earnings totaled $54.3 million compared with the year-ago quarter’s $24 million. Our estimate for the segment’s operating earnings was $23.6 million. The segment’s operating margin was 10.4% in the reported quarter compared with the year-ago quarter’s 5.2%. The improvement was driven by higher sales, lower incentive compensation and higher margins in Sensia.

Cash Position & Balance Sheet Updates

At the end of the first quarter of fiscal 2024, cash and cash equivalents were approximately $439.5 million compared with $1,071.8 million as of the end of fiscal 2023.

Cash flow from operations in the quarter was $32.6 million compared with the year-ago quarter’s $66.3 million. Return on invested capital was 18.5% as of Dec 31, 2023.

ROK’s long-term debt was $2.86 million at the end of the quarter under review, flat compared with fiscal 2023 end.

In the quarter under review, ROK repurchased 0.4 million shares for $120 million. As of the end of the quarter, $0.8 billion was available under the existing share-repurchase authorization.

FY24 Guidance

Rockwell Automation expects adjusted EPS of $12.00-$13.50 for fiscal 2024. The midpoint indicates year-over-year growth of 5%. The company expects to report sales growth of 0.5-6.5%. Organic sales growth is forecasted to range from negative 2.0% to positive 4.0%.

Price Performance

In the past year, Rockwell Automation’s shares have gained 8.6% compared with the industry’s 5.5% growth.

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Zacks Rank & Stocks to Consider

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

Some better-ranked stocks from the Industrial Products sector are Cintas Corporation (CTAS Quick QuoteCTAS - Free Report) , Eaton Corporation (ETN Quick QuoteETN - Free Report) and A. O. Smith Corporation (AOS Quick QuoteAOS - Free Report) . Each of these stocks carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Cintas’ fiscal 2024 EPS is pegged at $14.57. The estimate projects year-over-year growth of 12.2%. The consensus estimate for 2024 earnings has gone up 2% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 3.5%. CTAS shares have rallied 38% over the past year.

Eaton has an average trailing four-quarter earnings surprise of 4.2%. The Zacks Consensus Estimate for ETN’s fiscal 2024 earnings is pinned at $10.00 per share, which indicates year-over-year growth of 10.8%. The estimate has moved up 0.3% in the past 60 days. The company’s shares have gained 55% in a year.

The Zacks Consensus Estimate for A. O. Smith’s 2024 earnings is pegged at $4.03 per share, suggesting year-over-year growth of 6.3%. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days and suggests year-over-year growth of 6.3%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares have gained 37% in a year.