Rockwell Automation Misses on Q2 Earnings & Revs - Analyst Blog


Shares of Rockwell Automation, Inc. ( ROK ) reported second-quarter fiscal 2014 (ended Mar 31, 2014) adjusted earnings of $1.35 per share, up 2% from $1.33 earned in the prior-year quarter. Results, however, fell short of the Zacks Consensus Estimate of $1.35. Shares dipped 7.15% as adjusted earnings in the second quarter were negatively impacted by 8 cents due to a higher tax rate, owing primarily to the year-over-year decrease in tax benefits related to the U.S. research and development tax credit.

Rockwell Automation, Inc. - Quarterly Earnings Per Share | FindTheBest

Adjusted earnings exclude the net effect of non-operating pension costs and their related tax effect of 7 cents per share in the reported quarter and 9 cents in the year-ago quarter. Including these, earnings from continuing operations came in at $1.28 per share compared with the prior-year quarter figure of $1.24.

Total revenue was $1,601 million in the quarter, up 5% year over year. Revenues also fell short of the Zacks Consensus Estimate of $1,611 million. Organic sales grew 7% year over year while currency translation reduced sales by 2 percentage points. Growth was witnessed in all regions for the first time in over a year.

Operational Update

Cost of sales increased around 4% year over year to $945 million. Gross profit rose 6% to $656 million from $616 million in the year-ago quarter. Gross margin expanded 50 basis points (bps) year over year to 41%.

Selling, general and administrative expenses went up 4% from the prior-year quarter to $392 million. Consolidated segment operating income was $302 million, up 6% from $285 million in the second quarter of 2013. The operating margin expanded 20 bps year over year to 18.9% on the back of higher sales.

Segment Results

Architecture & Software: Net sales increased 7% year over year to $687 million in the second quarter. Segment operating earnings were $190.9 million, as against $170 million in the year-ago quarter. Segment operating margin increased to 27.7% from 26.6% a year ago.

Control Products & Solutions: Net sales rose 3% year over year to around $914 million. Segment operating earnings decreased 3% to $112 million from $115 million in the year-ago quarter. Segment operating margin contracted 80 bps year over year to 12.2%.


As of Mar 31, 2014, cash and cash equivalents amounted to $1234 million versus $1246 million as of Dec 31, 2013. As of Mar 31, 2014, long-term debt was $905 million, flat compared with the year-ago level. The debt-to-capitalization ratio was at 31% as of Mar 31, 2014 compared with 30% as of Dec 31, 2013.

Cash flow from operations was $406 million during second-quarter 2014, as against $370 million in the year-ago comparable period. Return on invested capital was 30.6% as of Mar 31, 2014, compared with 29.8% as of Mar 31, 2013.

Share Repurchase

During the reported quarter, Rockwell Automation repurchased 0.9 million shares for $110.7 million. As of Mar 31, 2014, the company had $313.7 million worth of shares remaining under the $1 billion share repurchase authorization.


Rockwell Automation reiterated its organic revenue growth rate in the range of 3.5-6.5% and segment margin to be about 20% for fiscal 2014. The company expects adjusted earnings per share to lie in the range of $6.00 to $6.35 for the full year.

Our View

Rockwell Automation will benefit from expansion in the emerging markets and strategic acquisitions. Additionally, a strong balance sheet position and free cash flow, along with dividends and share repurchases are expected to generate long-term shareholder value. However, uncertainty in the global economic scenario remains a headwind.

Milwaukee, WI-based Rockwell Automation is a leading global provider of industrial automation equipment, application-specific integrated software and consulting design services. It also offers industrial automation power, control and information solutions.

Currently, Rockwell carries a Zacks Rank #3 (Hold). However, better-ranked stocks in the retail sector include Gorman-Rupp Co. ( GRC ), iRobot Corporation ( IRBT ), and The Babcock & Wilcox Company ( BWC ). While Gorman-Rupp holds a Zacks Rank #1 (Strong Buy), iRobot and Babcock & Wilcox hold a Zacks Rank #2 (Buy).

BABCOCK&WILCOX (BWC): Free Stock Analysis Report

GORMAN RUPP CO (GRC): Free Stock Analysis Report

IROBOT CORP (IRBT): Free Stock Analysis Report

ROCKWELL AUTOMT (ROK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: BWC , GRC , IRBT , ROK

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