Entering text into the input field will update the search result below

Rockwell Automation Still Poised Between Excellence And Uncertainty

Stephen Simpson profile picture
Stephen Simpson


  • Rockwell remains a high-quality play on automation, but the company's growth isn't dramatically better than its peers and several end-markets could see slower growth in 2019/2020.
  • The partnership with PTC is already paying some dividends for Rockwell and allowing the company to better leverage the data generated/handled by its control systems.
  • Rockwell shares are a tougher call with ISM slowing and more concerns about the healthy of the industrial cycle.

Looking into 2019, Rockwell Automation (NYSE:ROK) seems to be in familiar territory – nobody’s really questioning the operational excellence of this leader in discrete automation, but there are plenty of concerns about end-market health, where industrials sit in the cycle, and whether Rockwell is as well-positioned for the next phase of automation as it was for the last.

I typically shoot for double-digit returns when I invest, and Rockwell doesn’t seem priced to deliver that unless you think long-term FCF growth can reach that grey area between mid-single-digits and high single-digits – a level of performance that’s not impossible, but certainly not conservative to expect. Although I’m tempted to call today’s potential returns “good enough” for a stock that seldom gets all that cheap unless/until industrial stocks really go fan-ward, I do believe there could be another round of angst and stock weakness early in 2019 that could be an opportunity to pick up high-quality industrials like Rockwell.

Whither The Cycle Goest?

Rockwell did miss expectations in the company’s fiscal fourth quarter (calendar third quarter), and guidance wasn’t perfect, but I can’t fairly call it a bad performance. Organic revenue growth of over 7% compared reasonably well to the peer group in which ABB (ABB) saw 7% and 3% growth in its automation businesses, Schneider (OTCPK:SBGSY) saw a little less than 7%, Emerson (EMR) saw 9%, and Siemens (OTCPK:SIEGY) saw 13% and 5% growth.

Logix was once again a strong positive driver, with revenue up 7%, while the process business was up 11%. Margins improved by about two points in the Architecture and Software business (on an adjusted basis), with a smaller sub-1% improvement in the Control Products & Solutions business.

Rockwell management’s rundown of its end-market commentary was interesting. The 10% decline in the auto business definitely pinches (it’s one of the

This article was written by

Stephen Simpson profile picture
Stephen Simpson is a freelance financial writer and investor. Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That last part isn't entirely true. Probably.

Analyst’s Disclosure: I am/we are long ABB, MMM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.