Rockwell Automation Inc.
(ROK - Free Report
) is expected to benefit from a favorable manufacturing environment, ongoing strength in heavy industries and positive impact of the tax reform. The company will also be aided by its increased investment in accelerated software development and commercial resources to fuel growth of its Information Solutions and Connective Services offering and to expand process capabilities in order to speed up growth.
Shares of the original equipment manufacturer (OEM) of industrial automation equipment, application specific integrated software and consulting design services have been performing well of late. Its shares have increased 17.1% in the past year, outperforming the industry
’s growth of 11.4%.
If you haven’t taken advantage of the share price appreciation yet, the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.
Solid Zacks Rank, Score
It has a VGM score
of B. Here V stands for Value, G for Growth and M for Momentum. The company’s score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. In fact, our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 or 2 (Buy) make solid investment choices.
The stock has an estimated long-term earnings growth rate of 12.6%.
Estimates for Rockwell Automation have moved up over the past 30 days, reflecting the optimistic outlook of analysts. The estimate for both fiscal 2018 and for fiscal 2018 advanced 1% to $7.88 and $8.83, respectively. The Zacks Consensus Estimate for fiscal 2018 reflects year-over-year growth 16.6% and for fiscal 2019 the estimate projects year-over-year growth of 12%.
Positive Earnings Surprise History
Rockwell Automation outpaced the Zacks Consensus Estimate in three of the trailing four quarters, generating a positive average earnings surprise of 5.64%.
Rockwell Automation delivered adjusted earnings per share of $1.89 in second-quarter fiscal 2018 (ended Dec 31, 2017), up 22% from $1.55 recorded in the prior-year quarter. The year-over-year performance was driven by elevated sales.
Given the upbeat fiscal second-quarter performance and backed by favorable global manufacturing environment, positive macroeconomic indicators, Rockwell Automation raised the adjusted EPS guidance to $7.70-$8.00 from $7.60-$7.90. At the mid-point, the new guidance range represents 16% year-over-year growth. The company projects sales growth at 4.5-7.5% and organic sales growth at 3.5-6.5% for the year.
Heavy industries will be the largest growth driver for Rockwell Automation, followed by consumer vertical. Further, lower tax rates would translate into improved earnings for the company and provide it with greater flexibility to deploy cash. Also, the impact of the tax reform on customers' investment decisions could benefit the company’s future performance. Global manufacturing environment remains favorable and macroeconomic indicators are positive.
To boost growth and other long-term objectives, Rockwell Automation will increase investments in fiscal 2018. These efforts include accelerated software development and commercial resources to fuel growth of its Information Solutions and Connective Services offering. Further, it accelerated investments to expand Process capabilities in order to accelerate growth. The company is also actively engaged in the evaluation of inorganic opportunities to accelerate the Connected Enterprise strategy. Meanwhile, the company will look for strategic acquisitions.
Other Stocks to Consider
Some other top-ranked stocks in the sector include Caterpillar Inc. (CAT - Free Report
) , Terex Corporation (TEX - Free Report
) and H&E Equipment Services, Inc. (HEES - Free Report
) . All these stocks carry a Zacks Rank #1.
Caterpillar has expected long-term growth rate of 13.3%. Its shares have appreciated 54% over the past year.
Terex has expected long-term growth rate of 20.2%. Its shares have gone up 32% in a year’s time.
H&E Equipment Services has expected long-term growth rate of 17.4%. Its shares have surged 108% over the past year.
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