Rockwell Automation
(
ROK
) has entered into a partnership with Terepac Corp, the
manufacturer of the world's tiniest digital electronics. Terepac
will be producing high volumes of its proprietary micro circuits
supporting the "Internet of Things" with radio frequency
identification (RFID) tags.
Per the agreement, Rockwell will fortify Terepac's
infrastructure, allowing it to miniaturize extensively more
circuits than its current capability.
Based in Waterloo, Ontario, Terepac is a pioneer in the
promising field of "Internet of Things". The company's technologies
enable sophisticated microelectronÂics to be printed on flexible
substrates at a fraction of the size and cost of conventional
method.
The entire devices with microprocessors, memory, and sensors can
be reduced to less than a millimeter square in size without making
any compromise with quality performance.
Rockwell intends to expand in the lines of advanced technologies
that are transforming the competitive landscape worldwide. With
this move, Rockwell will be helping in taking the innovative
technology and advanced microelectronics to its next level,
augmenting its own product portfolio.
Recently, the company has hiked its dividend by 11% to 47 cents
per share to be paid on September 10, 2012, to stockholders of
record as of August 13, 2012. Moreover, it has approved the
addition of $1 billion to its share repurchase program. This is in
addition to the previous buy-back authorization of $1 billion, of
which, the company had $51 million remaining as of June 7,
2012.
Rockwell's commitment towards increasing shareholders' return
reflects its free cash flow generating capability and a strong
balance sheet. Further, the company expects to repurchase nearly 3
million shares for the balance of the year.
However, Rockwell faces severe challenges from the macroeconomic
conditions, including the conditions prevailing in the U.S. and
Europe. As a result, it has narrowed its earnings guidance to the
range of $5.10-$5.40 per share versus the previous target of
$5.05-$5.45. Revenues are also narrowed to the range of $6.25-$6.45
billion from $6.2-$6.5 billion.
Moreover, currency also remains a headwind and the company
expects currency translation to reduce sales by two percentage
points. Rockwell also faces tough competition from companies like
ABB Ltd.
(
ABB
) and
Siemens AG
(
SI
).
Currently, Rockwell retains a short-term Zacks #3 Rank (Hold).
We have a long-term Neutral recommendation on the stock.
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