Rockwell Reports Sound Q4

Nov. 8.11 | About: Rockwell Automation, (ROK)

Rockwell Automation Inc. (NYSE:ROK) earnings of $1.39 per share in the fourth quarter of fiscal 2011 compared with 91 cents per share in the year-ago quarter, surpassing the Zacks Consensus Estimate of $1.22 per share.

Total revenue in this quarter increased 22% to $1.65 billion from $1.36 billion, exceeding the Zacks Consensus Estimate of $1.55 billion. Improvement in sales was attributed to currency translation (4%) and positive impact from acquisitions (1%).

Cost and Margins

Cost of sales was $991.1 million for the quarter compared with $827.7 million for the last quarter of fiscal 2010. Gross profit increased to $663.2 million from 529.2 million a year go. Consequently, gross margin increased by 110 basis points to 40.1% during the quarter.

Selling, general and administrative expenses were $388.1 million versus $354.3 million in the year ago quarter. Operating profit increased to $298.1 million in the reported quarter from $205.1 million in the year-ago quarter. Consequently, operating margin increased by 290 basis points to 18%.

Segmental Performance

Total revenue in the Architecture & Software segment increased 19% to $683.3 million. Currency translation contributed 5% to the improvement in sales.

Operating profit in the segment increased to $177.9 million in the quarter from $128.4 million. Consequently, operating margin improved by 370 basis points to 26%.

Total revenue in the Control Products and Solutions segment rose 24% to $971.0 million from $781.0 million in the prior-year quarter. The increase in sales was led by currency translation and acquisitions (6%).

Operating income in the segment increased to $120.2 million compared with $76.7 million in the prior-year quarter. Consequently, operating margin improved by 260 basis points to 12.4%.

Annual Results

For the full year 2011, the company reported earnings of $4.80 per share compared with $3.22 per share for the previous year. Earnings during the year surpassed the Zacks Consensus Estimate of $4.61 per share.

Net sales for the year increased 24% to $6.0 billion from $4.9 billion in fiscal 2010. It also surpassed the Zacks Consensus Estimate of $5.90 billion. The improvement in sales was led by currency translation and acquisitions (4%).

Financial Position

Cash and cash equivalents improved to $988.9 million as of September 30, 2011 compared with $813.4 million as of September 30, 2010. Long-term debt stood at $905.0 million as of September 30, 2011 compared with $904.9 million as of September 30, 2010.

Cash from operations increased to $643.7 million in the fiscal year ended September 30, 2011 from $494.0 million in the prior fiscal year. Capital expenditures were $120.1 million during fiscal 2011 compared with $99.4 million in the previous fiscal year.

During the fourth quarter, the company repurchased 1.3 million shares of common stock for $77.7 million. The company had $202 million remaining under the $1.0 billion share repurchase authorization as of September 30, 2011.

Outlook

For the fiscal year 2012, Rockwell expects sales in the range of $6.2 billion–$6.5 billion. This represents a 5%-9% growth, excluding currency translation. Based on the sales outlook, the company provided its EPS guidance in the range of $5.05–$5.45 for fiscal 2012.

Our Take

Based in Milwaukee, Wisconsin, Rockwell Automation Inc. is a global provider of industrial automation power, control, and information products and services. The company competes with ABB Ltd. (NYSE:ABB), Emerson Electric Co. (NYSE:EMR) and Siemens AG (SI).

The global market expansion and product line diversification are the growth drivers for the company. However, slowdown in acquisitions and increase in raw material prices may lead to sluggish growth. As a result, the company retains a Zacks #3 Rank on its stock, which implies a Hold recommendation for the short-term.


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