A month has gone by since the last earnings report for Rockwell Automation (ROK). Shares have added about 5.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Rockwell Automation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Rockwell's Q3 Earnings & Sales Top Estimates, View Up
Rockwell Automation reported adjusted earnings of $1.27 in third-quarter fiscal 2020 (ended Jun 30, 2020), beating the Zacks Consensus Estimate of 1.13. The bottom line, however, plummeted 47% year over year, primarily on lower sales.
Including one-time items, the company’s earnings came in at $2.73 per share compared with the $2.20 reported in the year-ago quarter.
Total revenues came in at $1,394 million, down 16.3% from the prior-year quarter. Moreover, the top-line figure outpaced the Zacks Consensus Estimate of $1,390 million. Organic sales in the quarter were down 17.6%, while foreign-currency translations had a negative impact of 1.9%. However, acquisitions contributed 3.2% to the increase in sales.
Cost of sales decreased 10.2% year over year to $839.8 million. Gross profit declined 24% year over year to $554.2 million. Selling, general and administrative expenses flared up 2.2% year over year to $370 million.
Consolidated segment operating income totaled $229 million, down 42.1% from the prior-year quarter. Segment operating margin was 16.5% in the fiscal third quarter compared with the prior-year quarter’s 23.8%.
Architecture & Software: Net sales came in at $621.4 million in the fiscal third quarter, registering a year-over-year decline of 16.9%. Organic sales were down 15.9%, and currency translation had a negative impact of 1.8%. However, acquisitions contributed 0.8%. Segment operating earnings came in at $148 million compared with the $223 million reported in the prior-year quarter. Segment operating margin contracted 23.8% in the quarter compared with the year-ago quarter’s 29.8%.
Control Products & Solutions: Net sales declined 15.8% year over year to $773 million in the reported quarter. Organic sales slid 18.9%, while inorganic investments boosted sales by 5.1%. Currency translation, however, reduced sales by 2%. Segment operating earnings slumped 52.6% year over year to $82 million. Segment operating margin was 10.6% compared with the year-earlier quarter’s 18.9%.
As of Jun 30, 2020, cash and cash equivalents totaled $909.8 million, down from $1,018.4 million as of Sep 30, 2019. As of Jun 30, 2020, total debt was $2.4 billion, up from $2.3 billion as of Sep 30, 2019.
Cash flow from operations for the nine-month period ended Jun 30, 2020 was $795 million compared with the $707 million generated in the prior-year comparable period. Return on invested capital was 27.9% as of Jun 30, 2020, compared with the 39% witnessed in the prior-year period.
During the fiscal third quarter, Rockwell repurchased 0.3 million shares for $48.5 million. As of the quarter end, $853.7 million was available under the existing share-repurchase authorization.
Fiscal 2020 Guidance
The company anticipates fiscal 2020 adjusted earnings per share in the band of $7.40-$7.60, up from prior estimate of $6.90-$7.70. Organic sales growth is expected to be a negative 8%. Reported sales growth is expected to be a negative 5.5%. Inorganic sales growth is projected at 4% for the fiscal year, while currency translation impact is expected to be a negative 1.5%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
At this time, Rockwell Automation has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Rockwell Automation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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