Rockwell Automation, Inc. ( ROK )
reported third quarter of fiscal 2012 earnings of $1.33 per share
compared with $1.22 in the prior-year quarter. The results were was
ahead of the Zacks Consensus Estimate of $1.31.
Sales grew 3% to $1.560 billion in the quarter, missing the Zacks
Consensus Estimate of $1.598 billion. Organic sales contributed 7
percentage points to the increase, while currency translation
negatively impacted sales by 4 percentage points.
Cost of sales increased 2% year over year to $928.9 million from
$909.4 million in the prior-year quarter. Gross profit improved
4.1% year over year to $631.5 million, with gross margins expanding
50 basis points (bps) to 40.5%.
Selling, general and administrative expenses decreased marginally
to $369.8 million from $370 million in the prior-year quarter.
Operating income went up to $284 million in the quarter from $263.3
million in the same period of 2011. Operating margin improved 80
bps to 18.2%.
Segment Results
Architecture & Software : Net sales declined
1% to $663.8 million in the quarter. Organic sales contributed 3
percentage points while currency translation affected sales by 4
percentage points. Operating earnings were $182.3 million, up 3.6%
year over year. Operating margin was 27.5% compared with 26.1% a
year ago.
Control Products & Solutions : Net sales
increased 6% to $896.6 million in the quarter. Acquisitions added 1
percentage point and organic sales added 10 percentage points to
the increase while currency translation reduced sales by 5
percentage points. Operating earnings improved 16.4% to $101.7
million. Operating margin was 11.3%, a 90 bps year-over-year
improvement.
Financials
Rockwell had cash and cash equivalents of $805.6 million as of
June 30, 2012, compared with $1.02 billion as of June 30, 2011.
Total debt was $1.175 billion as of June 30, 2012, compared with
$905 million as of June 30, 2011. The debt-to-capitalization ratio
was 37.9% as of June 30, 2012, compared with 36% as of March 31,
2012, and 34% as of December 31, 2011.
In the first nine months of fiscal 2012, the company's cash flow
from operating activities reduced to $328.6 million from $462.5
million in the first nine months of fiscal 2011. Capital
expenditures during the period increased to $94.9 million from $76
million in the comparable prior-year period.
During the quarter, Rockwell repurchased 1.6 million shares for
$121 million. The company had $32.5 million worth of shares
remaining under the $1 billion share repurchase authorization as of
June 30, 2012.
Guidance
Rockwell expects sales to be around $6.2 billion in fiscal 2012,
down from the previous guidance of between $6.25 billion and $6.45.
It expects earnings in the range of $5.00 to $5.20 per share, down
from the previous guidance of $5.10 to $5.40 per share.
Our Take
Recently, Rockwell hiked the quarterly dividend by 11% to 47 cents
per share, adding value to the share holders. The company's
commitment towards increasing shareholders' return reflects its
free cash flow generating capability and a strong balance
sheet.
Moreover, its Board has approved the addition of $1 billion to
its share repurchase program. A lower share count would turn out to
be a tailwind for earnings per share for the next few
quarters.
However, the company faced headwinds from currency in the reported
quarter. It is thought that currency translation would reduce sales
further in fourth quarter of fiscal 2012.
Rockwell competes with ABB Ltd ( ABB ),
Emerson Electric Company ( EMR )
and Siemens AG ( SI ).
Currently, it retains a Zacks #3 Rank, which translates to a
short-term (1 to 3 months) Hold rating. We have a long-term Neutral
recommendation on the stock.
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