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Rockwell Automation Shares Up 29% YTD: What's Driving it?

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Shares of Rockwell Automation, Inc. (ROK - Free Report) have rallied 28.6% year to date compared with the industry’s growth of 21.9% and the S&P 500’s gain of 5.4%. The company’s cost-control actions, acquisitions, and continued expansion of products, solutions and services portfolio have contributed to this rally.



The company has a market capitalization of $25.4 billion. Rockwell Automation has an expected long-term earnings per share growth rate of 5.4%.

Rockwell Automation has outpaced the Zacks Consensus Estimate in three of the trailing four quarters and met in the other. It has a trailing four-quarter average positive earnings surprise of 10.57%.

Let’s delve deeper and analyze the factors driving the stock.

Driving Factors

Rockwell Automation reported adjusted earnings of $2.43 in second-quarter fiscal 2020 (ended Mar 31, 2020), beating the Zacks Consensus Estimate of $1.83. The bottom line improved 19% from the the prior-year quarter, primarily on lower incentive compensation expense.

The company has announced temporary cost-containment measures in view of the weak demand and uncertain market conditions on account of the COVID-19 pandemic. It is cutting down discretionary spending across the organization, and rolling out other temporary cost actions. Rockwell Automation has also announced salary cuts. These actions are likely to generate $150 million of savings in fiscal 2020.

Demand for packaged food and beverages are shooting up due to the travel restrictions imposed by governments around the world. Roughly 70% retail for grocery stores and home delivery and 30% foodservice for restaurants contribute to the Food & Beverage business. Further, the company is implementing freight surcharges to mitigate elevated supply-chain costs.

The company will also benefit from its focus on broadening the portfolio of hardware and software products, solutions and services. Further, significant investments to globalize its manufacturing, product development and customer-facing resources will stoke growth. The company is likely to witness above-market growth through a combination of share gains in core platforms, double-digit growth in Information Solutions and Connected Services segment, and contributions from acquisitions and inorganic investments.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the Industrial Products sector are Silgan Holdings Inc. (SLGN - Free Report) , Broadwind Energy, Inc. (BWEN - Free Report) and Axon Enterprise, Inc. (AAXN - Free Report) . While Silgan sports a Zacks Rank #1 (Strong Buy), Broadwind Energy and Axon carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Silgan has a projected earnings growth rate of 11.3% for 2020. The company’s shares have gained 15% in the past three months.

Broadwind Energy has an expected earnings growth rate of 174% for the current year. The stock has appreciated 6% over the past three months.

Axon has an estimated earnings growth rate of 14.4% for the ongoing year. The company’s shares have rallied 21.3% in three months’ time.

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