Will Rockwell Automation (ROK) Miss Q2 Earnings this Season?

Leading global provider of industrial automation power, control, and information solutions, Rockwell Automation, Inc. (ROK) is set to report third-quarter 2014 results before market opens on Jul 30.

Last quarter, Milwaukee, WI-based Rockwell Automation failed to meet the Zacks Consensus Estimate and posted a negative earnings surprise of 7.53%. Let’s see how things are shaping up for this announcement.

Factors to Consider

Rockwell Automation will benefit from expansion in the emerging markets and strategic acquisitions. Additionally, a strong balance sheet position and free cash flow, along with dividends and share repurchases are expected to generate long-term shareholder value.

Even though Rockwell Automation expects healthy sequential growth in the second half, it is the fourth quarter of fiscal 2014 which will heavily benefit from its added solutions and services growth. Moreover, comparisons will become difficult in the second half. This will be particularly for the solutions and services businesses and, especially, in the third quarter.

Rockwell Automation expects organic revenue growth rate in the range of 3.5% to 6.5% and segment margin to be about 20% for fiscal 2014. Operating margin is projected to be about 20% for the full year. However, the company expects the margin performance to benefit the fourth quarter. Furthermore, Canada sales were up slightly in the previous quarter, but there is continued weakness in resource-based industries.

Earnings Whispers?

Our proven model does not conclusively show that Rockwell Automation is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: Rockwell Automation has an Earnings ESP (Expected Surprise Prediction) of -1.92%. This is because the Most Accurate estimate stands at $1.53 per share while the Zacks Consensus Estimate is higher at $1.56, resulting in -1.92% ESP.

Zacks Rank: Though Rockwell Automation’s Zacks Rank #2 (Buy) increases the predictive power of ESP, the company’s ESP of -1.92% lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some other companies from the machinery industry for investors to consider, that, according to our model have the right combination of elements to post an earnings beat this quarter:

Kennametal Inc. (KMT) has Earnings ESP of +1.12% and a Zacks Rank #3 (Hold).

Eaton Corporation plc (ETN) has Earnings ESP of +0.90% and a Zacks Rank #3.

Nordson Corporation (NDSN) has Earnings ESP of +1.77% and a Zacks Rank #3.