Rockwell Automation, Inc. (ROK) reported fourth-quarter fiscal 2014 (ended Sep 30, 2014) adjusted earnings of $1.86 per share, up 15% from $1.62 earned in the prior-year quarter. Results beat the Zacks Consensus Estimate of $1.82.
The company’s reported earnings came in at $1.79 per share, rising 17% from $1.53 reported in the year-ago quarter.
Total revenue was $1,782 million in the quarter, up 4% year over year. Revenues, however, fell short of the Zacks Consensus Estimate of $1,804 million. Organic sales grew 4.4% year over year.
Operational Update
Cost of sales increased around 1% year over year to $1,029 million. Gross profit rose 8% to $753 million from $697 million in the year-ago quarter. Gross margin expanded 160 basis points (bps) year over year to 42.3%.
Selling, general and administrative expenses went down 1.5% from the prior-year quarter to $397.8 million. Consolidated segment operating income was $395.8 million, up 10.6% from $357.8 million in the fourth quarter of 2013. Operating margin expanded 130 bps year over year to 22.2% on the back of higher sales.
Segment Results
Architecture & Software: Net sales increased 4.6% year over year to $747.7 million in the fourth quarter. Segment operating earnings were $232.7 million, as against $217.7 million in the year-ago quarter. Segment operating margin increased to 31.1% from 30.5% a year ago.
Control Products & Solutions: Net sales went up 3.3% year over year to around $1,034.4 million. Segment operating earnings improved 16% to $163 million from $140 million in the year-ago quarter. Segment operating margin expanded 180 bps year over year to 15.8%.
Fiscal 2014 Performance
Rockwell posted record adjusted earnings of $6.17 per share for fiscal 2014, up 8% from $5.71 a share in fiscal 2013. Earnings came in the middle of management’s guided range of $6.10 to $6.25 per share. It also came ahead of the Zacks Consensus Estimate of $6.14. Including special items, Rockwell posted earnings of $5.91 per share for the year compared with $5.36 in fiscal 2013.
Revenues for the full year increased 4.3% year over year to a record $6.62 billion from $6.35 billion in fiscal 2013. However, it fell short of the Zacks Consensus Estimate of $6.65 billion. Sales performance was led by the U.S. with 7% organic growth.
Financials
As of Sep 30, 2014, cash and cash equivalents amounted to $1,191 million versus $1,200.9 million as of Sep 30, 2013. As of Sep 30, 2014, long-term debt was $905.6 million, almost flat with $905.1 million as of Sep 30, 2013.
Cash from operations for the twelve-month period ended Sep 30, 2014, were $1,033.3 million, up 1.8% from $1,014.8 million in the year-ago comparable period. Return on invested capital was 30.1% as of Sep 30, 2014, compared with 31.4% as of Sep 30, 2013.
On Nov 5, 2014, Rockwell declared a 12% increase in its quarterly dividend to 65 cents per share. The increased dividend will be paid on Dec 10, 2014, to shareholders of record as of Nov 17, 2014.
Share Repurchase
During the reported quarter, Rockwell Automation repurchased 1.2 million shares for $140 million. During fiscal 2014, the company repurchased 4.1 million shares for $483.8 million. As of Sep 30, 2014, the company had $1,051.4 million worth of shares remaining under its previous share repurchase authorization.
Guidance
For fiscal 2015, Rockwell Automation projects organic revenue growth rate of 2.5% to 6.5%. The company expects adjusted earnings per share for the full year to be in the range of $6.55 to $6.95.
Our View
Rockwell Automation will benefit from growth in automation. Continuous investment in innovative technology and domain expertise will also drive growth. The company also 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 #3 (Hold). Other players in the industrial products industry, which look attractive at current levels, include Adept Technology Inc. (ADEP), iRobot Corp. (IRBT), and Allegion plc Ordinary Shares (ALLE). All these stocks carry a Zacks Rank #1 (Strong Buy).
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