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Rockwell Automation Beats on Q1 Earnings & Revs - Analyst Blog

Rockwell Automation, Inc. ( ROK ) reported first-quarter fiscal 2014 (ended Dec 31, 2013) adjusted earnings of $1.47 per share, up 20% from $1.23 earned in the prior-year quarter. The results beat the Zacks Consensus Estimate of $1.39.

Adjusted earnings exclude the net effect of non-operating pension costs and their related tax effect of 6 cents per share in the reported quarter and 9 cents in the year-ago quarter. Including this, earnings from continuing operations stands at $1.41 per share compared with the prior-year quarter figure of $1.14.

Total revenue was $1,591.7 million in the quarter, up 7% year over year. The results surpassed the Zacks Consensus Estimate of $1,560 million. Organic sales also grew 7% year over year.

Operational Update

Cost of sales increased around 5.2% year over year to $928 million. Gross profit rose 9.2% to $663.7 million from $607.3 million in the year-ago quarter. Gross margin expanded 80 basis points (bps) year over year to 41.6%.

Selling, general and administrative expenses went up 3.1% from the prior-year quarter to $385.4 million. Consolidated segment operating income was $328 million, up 19% from $276 million in the first quarter of 2013. The operating margin expanded 210 bps year over year to 20.6% on the back of higher sales.

Segment Results

Architecture & Software : Net sales increased 6% year over year to $695.9 million in the first quarter. Segment operating earnings were $211.9 million, as against $183.2 million in the year-ago quarter. Segment operating margin increased to 30.4% from 27.9% a year ago.

Control Products & Solutions : Net sales rose 8% year over year to around $895.8 million. Segment operating earnings increased 25% to $116.1 million from $92.8 million in the year-ago quarter. Segment operating margin expanded 180 bps year over year to 13%.

Financials

As of Dec 31, 2013, cash and cash equivalents amounted to $1246 million versus $1201 million as of Sep 30, 2013. As of Dec 31, 2013, long-term debt was $905 million; flat compared to Sep 30, 2013. The debt-to-capitalization ratio contracted 70 bps to 25.2% as of Dec 31, 2013, from 25.9% as of Sep 30, 2013.

Cash flow from operations was $203.5 million during first-quarter 2014, as against $167.3 million in the year-ago comparable period. Return on invested capital was 31.4% as of Dec 31, 2013, compared with 29% as of Dec 31, 2012.

Share Repurchase

During the reported quarter, Rockwell Automation repurchased 1.0 million shares for $110.7 million. As of Dec 31, 2013, the company had $424.4 million worth of shares remaining under the $1 billion share repurchase authorization.

Guidance

Rockwell Automation revised its organic revenue growth in the range of 3%-6% for fiscal 2014 from the previous band of 2%-6%. The company also modified adjusted earnings per share range of $6.00-$6.35 for the full year from $5.95-$6.35.

Our View

Rockwell Automation will benefit from expansion in the emerging markets and opportunistic acquisitions. Additionally, 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 Graco Inc. ( GGG ), Gorman-Rupp Co. ( GRC ) and Altra Industrial Motion Corp. ( AIMC ). All of these have a Zacks Rank #2 (Buy).

ALTRA HOLDINGS (AIMC): Free Stock Analysis Report

GRACO INC (GGG): Free Stock Analysis Report

GORMAN RUPP CO (GRC): 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 Nasdaq, Inc.


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

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