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Rockwell Automation (ROK) Q2 Earnings: What to Expect?

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Rockwell Automation Inc. (ROK - Free Report) is scheduled to report second-quarter fiscal 2018 results before the opening bell on Apr 25. In the last quarter, Rockwell Automation delivered earnings of $1.96 per share that beat the Zacks Consensus Estimate of $1.74 by 12.6%. The year-over-year performance was driven by elevated sales, partially offset by higher investment spending. The company’s earnings have surpassed estimates in three of the trailing four quarters, recording an average positive earnings surprise of 7.07%.
 
Let’s see how things are shaping up for this announcement.
 
Rockwell Automation, Inc. Price and EPS Surprise
 
Improving global macroeconomic conditions and industrial production, growing orders bode well for a fiscal second-quarter performance. The company will benefit from growth in heavy industries vertical.  However, the Transportation vertical will remain weak. Even though new program commitments for electric vehicles hold promise, management remains uncertain regarding the timing of the capital spending as automotive manufacturers may be deferring MRO spending until they finalize plans for accelerated investment for the electric vehicle market. Additionally, restructuring costs as well as elevated input costs might hinder the company’s quarterly performance.
 
The Zacks Consensus Estimate for the Architecture & Software segment’s net sales is pegged at $763 million, an estimated year-over-year rise of 6%. The estimate for the Control Products & Solutions segment’s sales is pegged at $890 million, a 7% increase over the prior-year quarter.
 
The Architecture & Software segment’s operating profit is expected to increase 9% on a year over year basis to $208 million. Operating profit for the Control Products & Solutions segment is expected to improve 25% year over year to $131 million.
 
The Zacks Consensus Estimate for revenues for the second quarter is pegged at $1.65 billion, depicting a 6% year-over-year rise. Over the last 30 days, the Zacks Consensus Estimate for the fiscal second-quarter’s earnings remained unchanged at $1.80. The estimate of $1.80 per share reflects a year-over-year improvement 16%. Shares of the company have appreciated 13.6% over the past year outperforming growth of 13.2% recorded by the industry.
 
Earnings Whispers
 
Our proven model does not conclusively show that Rockwell Automation will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimates. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
 
That is not the case here as you will see below.
 
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.14%.
 
Zacks Rank: Rockwell Automation is Zacks #2 Ranked company. Though a Zacks Rank of 2 increases the predictive power of ESP, a negative ESP makes surprise prediction difficult.
 
We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
 
Stocks to Consider
 
Here are a few industrial products stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
 
Axon Enterprise, Inc. (AAXN - Free Report) has an Earnings ESP of +12.50% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here. Axon’s shares have surged 85% in the past year.
 
The Earnings ESP for Alarm.com Holdings, Inc. (ALRM - Free Report) is +5.44%. It sports a Zacks Rank #1. Shares of Alarm.com Holdings have gone up 32% in a year’s time.
 
Rexnord Corporation (RXN - Free Report) has an Earnings ESP of +4.36% and a Zacks Rank #2. Its shares have gone up 34% in a year’s time.
 
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