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Rockwell Automation (ROK) Q1 Earnings Surpass Estimates

Rockwell Automation, Inc.ROK reported adjusted earnings per share of $1.75 in first-quarter fiscal 2017 (ended Dec 31, 2016), up 17% from $1.49 earned in the prior-year quarter. Further, earnings outpaced the Zacks Consensus Estimate of $1.45, a positive earnings surprise of 21%. The year-over-year performance was driven by higher sales, strong margin performance and lower tax rates.

Including one-time items, the company's earnings came in at $1.65 per share, up 18% from the year-ago quarter figure of $1.40.

Total revenue was $1,490 million in the quarter, up 4.5% year over year and surpassed the Zacks Consensus Estimate of $1,419 million. Organic sales rose 3.8%, acquisitions contributed 1.8% while unfavorable foreign currency translations had an impact of 1.1%.

Rockwell Automation's shares have outperformed the Zacks categorized Industrial Automation/Robotics sub industry in the past one year. The company's share price has surged 56.7% in the last one year, while the subindustry witnessed a gain of 51.2% in the same time frame.

Operational Update

Cost of sales increased 4% year over year to $848 million. Gross profit went up 5% to $642 million from $613 million in the year-ago quarter. Selling, general and administrative expenses increased 3% to $370 million.

Consolidated segment operating income was $317 million, up 7% from $296 million in the prior-year quarter. Segment operating margin was 21.2% in the quarter, a 50 basis point expansion from 20.7% in the prior-year quarter on the back of higher sales and productivity, partially offset by higher incentive compensation.

Rockwell Automation, Inc. Price, Consensus and EPS Surprise

Rockwell Automation, Inc. Price, Consensus and EPS Surprise | Rockwell Automation, Inc. Quote

Segment Results

Architecture & Software : Net sales rose 8.3% year over year to $696 million in first-quarter fiscal 2017. Organic sales increased 7.6%, acquisitions contributed 1.7% while currency translations hurt sales by 1%. Segment operating earnings were $209 million, compared with $176 million a year ago. Operating margin expanded 260 basis points (bps) to 30% from 27.4% a year ago, primarily due to higher sales.

Control Products & Solutions : Net sales inched up 1% to $794 million in the reported quarter. Organic sales increased 0.7%, acquisitions contributed 1.9%, while currency translations dented sales by 1.3%. Segment operating earnings dropped 10% to $108 million from $120 million in the year-ago quarter. Operating margin contracted 170 bps to 13.6%, owing to higher incentive compensation.

Financials

As of Dec 31, 2016, cash and cash equivalents were $1,594.6 million, up from $1,526.4 million as of Sep 30, 2016. As of Dec 31, 2016, long-term debt was $1,240.9 million, down from $1,516.3 million as of Sep 30, 2016.

Cash flow from operations for fiscal first-quarter 2017 came in at $311 million compared with $185 million in the year-ago quarter. Return on invested capital was 34.6% as of Dec 31, 2016, increasing from 32.6% in the year-ago quarter.

During the reported quarter, Rockwell Automation repurchased 0.6 million of its shares for $80.8 million. As of Dec 31, 2016, $864 million was available under the existing share repurchase authorization.

Guidance

Rockwell Automation expects continued growth in the consumer and transportation verticals while heavy industry end markets will remain almost flat year over year. The company returned to organic growth in its largest market - the U.S., and witnessed double-digit growth in emerging markets. Given the strong performance in the first quarter, Rockwell Automation has increased fiscal 2017 organic sales guidance by one point across the range and earnings per share guidance by 10 cents across the range.

The company now anticipates adjusted EPS in the range of $5.95 to $6.35 per share. The company forecasts reported sales growth to be in the range of 1-5% and organic sales growth also in the range of 1-5%.

Zacks Rank & Key Picks

Currently, Rockwell Automation carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space include Altra Industrial Motion Corp. AIMC , Actuant Corp. ATU and Apogee Enterprises, Inc. APOG . All three of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Altra Industrial Motion has a positive average earnings surprise of 8.06% in the last four quarters. Actuant generated a positive average earnings surprise of 11.47% in the trailing four quarters. Apogee has delivered an average positive earnings surprise of 13.24% in the last four quarters.

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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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