On Apr 1, 2014, we issued an updated research report on
Rockwell Automation, Inc.
). This provider of automation equipment is expected to benefit
from expansion in emerging markets, acquisitions and strong
balance sheet position.
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Rockwell Automation started its fiscal 2014 year with healthy
top-line growth and strong earnings conversion in its
first-quarter fiscal 2014 results. The company reported a 20%
year-over-year improvement in its adjusted earnings per share to
$1.47. The results also beat the Zacks Consensus Estimate of
$1.39 per share. Total revenue was $1,591.7 million in the
quarter, up 7% year over year. Organic sales also grew 7% year
During the reported quarter, Rockwell Automation repurchased 1.0
million shares for $110.7 million. With a manageable
debt-to-capitalization ratio of 25% and cash position of $1.2
billion as of Dec 31, 2013, the company can reinvest in growth
opportunities, pursue mergers and acquisitions and return cash to
Rockwell raised its organic revenue growth in the range of 3%-6%
for fiscal 2014 from the previous band of 2%-6%. The company also
revised its adjusted earnings per share to the range of
$6.00-$6.35 for the full year from $5.95-$6.35. The company
expects sales to be around $6.6 billion.
Notably, in Oct 2013, Rockwell Automation entered into an
agreement to purchase vMonitor. This will help the company in
various wireless solutions, primarily for monitoring and
controlling wellhead and upstream oil and gas applications.
Additionally, in Nov 2013, Rockwell Automation acquired Jacobs
Automation, which will add intellectual capital and unique
technology to its resources.
Despite these positives, the company's increased spending to
support growth will continue to pressure margins in the near
term. Rockwell Automation needs to continually develop advanced
technologies for new products and product enhancements to counter
competition. Developing new products requires high levels of
innovation and the development process is often lengthy and
Soft economic growth, lack of credit availability and project
delays in China will hurt the company as well. Moreover, intense
competition and uncertainty in the global economy remain
headwinds in the near term.
Currently, Rockwell Automation carries a Zacks Rank #3 (Hold).
Key Picks from the Sector
Some better-ranked stocks worth considering at the moment include
Illinois Tool Works Inc.
). All of these sport a Zacks Rank #1 (Strong Buy).