Rockwell Automation, Inc. (ROK) reported adjusted earnings of $1.64 per share in first-quarter fiscal 2015, up 12% from $1.47 earned in the prior-year quarter. Results beat the Zacks Consensus Estimate of $1.49, a positive earnings surprise of 10%.
The company’s reported earnings came in at $1.56 per share, rising 11% from $1.41 in the year-ago quarter.
Total revenue was $1,574 million in the quarter, down 1% year over year due to currency headwind. Revenues, however, beat the Zacks Consensus Estimate of $1,562 million. Organic sales grew 2% year over year, primarily on the back of strength in the Architecture & Software segment as well as in the Latin America region.
Operational Update
Cost of sales dipped 4% year over year to $887 million. Gross profit rose 4% to $687 million from $664 million in the year-ago quarter. Gross margin expanded 200 basis points (bps) year over year to 43.7%.
Selling, general and administrative expenses increased marginally by 0.4% from the prior-year quarter to $386.9 million. Consolidated segment operating income was $346.8 million, up 6% from $328 million in the first quarter of 2014. Operating margin expanded 140 bps year over year to 22% on the back of higher organic sales, strong productivity, and favorable mix, partially offset by increased spending.
Segment Results
Architecture & Software: Net sales increased 2% year over year to $708 million in the quarter. Segment operating earnings were $221.4 million, as against $211.9 million in the year-ago quarter. Segment operating margin increased 90 basis points to 31.3% from 30.4% a year ago.
Control Products & Solutions: Net sales went down 3% year over year to $867 million. Segment operating earnings improved 8% to $125 million from $116 million in the year-ago quarter. Segment operating margin expanded 150 bps year over year to 14.5%.
Financials
As of Dec 31, 2014, cash and cash equivalents amounted to $1,291 million versus $1191 million as of Sep 30, 2014. As of Dec 31, 2014, long-term debt was $905.6 million, flat with the amount as of Sep 30, 2014.
Cash from operations for the first quarter were at $268 million compared with $203 million in the prior-year quarter. Return on invested capital was 30.7% as of Dec 31, 2014, compared with 31.4% as of Dec 31, 2013.
During the reported quarter, Rockwell Automation repurchased 1.55 million shares for $167 million. As of Dec 31, 2014, the company had $884 million worth of shares remaining under its $1 billion share repurchase authorization.
Guidance
Rockwell Automation now expects sales of about $6.6 billion in fiscal 2015. This includes a currency headwind of about 4.5 points and organic sales growth in the range of 2.5% to 5.5%. The company narrowed its earnings per share guidance to a range of $6.50 to $6.80 from the previous range of $6.55 to $6.95 due to more significant headwind from a stronger U.S. dollar and the impact of lower oil prices.
Our View
Rockwell Automation will benefit from growth in automation. Continuous investment in innovative technology and domain expertise will also drive growth. Moreover, the company remains focused on expanding in the emerging markets and making 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. However, volatility in foreign exchange rate remains a matter of concern.
Milwaukee, WI-based Rockwell Automation is a leading global provider of industrial automation equipment, application-specific integrated software and consulting design services. It also offers industrial automation power, control and information solutions.
Currently, Rockwell carries a Zacks Rank #4 (Sell). Better-ranked stocks in the industrial products industry include ScanSource, Inc (SCSC), Adept Technology Inc. (ADEP) and HollySys Automation Technologies, Ltd. (HOLI). Both of these stocks carry a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment