Rockwell Automation Inc. (ROK) recently reiterated its fiscal 2009 guidance of $1.40 to $1.70 per share, which represents a 59% to 66% year-over-year decline in earnings.
Revenue for the year is expected to fall about 24% compared to 2008 due to a significant deceleration in customer demand, increasing uncertainty in the business environment and unfavorable impact of currency translation.
The slowdown in industrial equipment spending seen over the last few quarters is expected to continue in the near term. Moreover, the global economy uncertainty increases the possibility of additional capex cuts by Rockwell’s customers, which would further hurt demand for its products.
The company’s sales depend on the level of global or regional industrial production and the financial performance of major industries that it serves. All the developed markets are expected to witness a negative GDP growth in the near term. Rockwell expects GDP growth in Asia-Pacific, Latin America and Eastern Europe to continue to exceed global GDP growth, albeit at a significantly lower rate compared to the previous year.
We believe the company is well positioned for long-term growth. Rockwell has a strong global market presence. The company also aims to broaden its portfolio of products, services and solutions as it enters new markets.
Successful diversification of its revenue base through expanded portfolio of products, solutions and services, as well as applications, will enhance the Rockwell’s market accessibility and make it less dependent on any particular industry or geographical region. We maintain a Neutral recommendation on the stock.