Mixed 1Q for Rockwell Automation (ECTY) (HOLI) (IRBT) (ROK)

Sales inched up 1% to $1.489 billion in the quarter, surpassing the Zacks Consensus Estimate of $1.481 billion. Organic sales increased 1.5% but currency translation reduced sales by less than 1 percentage point. Growth witnessed in Latin America and the U.S markets was mitigated by declines in Asia-Pacific and Europe, Middle East, Africa (EMEA).

Cost of sales increased 3% year over year to $882 million in the quarter. Gross profit declined 2% year over year to $607 million, leading to a 120 basis points (bps) contraction in gross margin to 40.8%.

Selling, general and administrative expenses increased 3% to $373 million from the prior-year quarter. Segment operating income was $276 million in the quarter compared with $292 million in the first quarter of 2012. Segment operating margin contracted 130 basis points to 18.5%.

Segment Results

Architecture & Software: Net sales inched up 1% to $657 million in the quarter. Organic sales increased 2% while currency translation affected sales by 1%. Operating earnings were $183.2 million, down 3% year over year. Segment operating margin was 27.9% compared with 29.1% a year ago.

Control Products & Solutions: Net sales increased 1% to $831.7 million in the quarter. Segment operating earnings declined 10% to $92.8 million. Segment operating margin was 11.2%, a 130-basis point contraction year over year.

Financials

Rockwell Automation had cash and cash equivalents of $954.3 million as of Dec 31, 2012 compared with $903.9 million as of Sep 30, 2012. Total debt was $1.16 billion as of Dec 31, 2012, compared with $1.06 billion as of Sep 30, 2012.

The debt-to-capitalization ratio was 37% as of Dec 31, 2012, compared with 36% as of Sep 30, 2012. In the first quarter of fiscal 2013, the company generated cash flow from operating activities of $167.3 million in contrast to cash usage of $189 million in the prior year quarter.

During the reported quarter, Rockwell Automation repurchased 1.2 million shares for $88 million. As of Dec 31, 2012, the company had $848.9 million worth of shares remaining under the $1 billion share repurchase authorization.

Guidance

Rockwell Automation affirmed its sales guidance in the range of $6.35 to $6.65 billion for fiscal 2013. The company has factored in organic growth of 1% to 5% while currency translation and acquisitions will add one point of growth. It expects earnings in the range of $5.35 to $5.75 per share for the full year.

Based in Milwaukee, Wisconsin, Rockwell Automation is an original equipment manufacturer (OEM) of industrial automation equipment, application specific integrated software and consulting design services. The company retains a short-term Zacks Rank #2 (Buy). Its peers HollySys Automation Technologies, Ltd. (HOLI), iRobot Corporation (IRBT) and ECOtality, Inc. (ECTY) have yet to announce their December quarter results.