Rockwell Automation Inc. (ROK - Analyst Report) is the world’s largest company dedicated to industrial automation. Its products, services and solutions address a broad range of challenges in every major industrial sector, from automotive and tire to mining and oil and gas, from pharmaceuticals to food and beverage. Its brands include Allen-Bradley, Reliance Electric and Rockwell Software.
Rockwell’s growth and performance strategy seeks to achieve growth rates in excess of the automation market by expanding its served market, diversifying sales streams by broadening portfolio of products, solutions and services, expanding its global presence, growing market share and making acquisitions.
However, given weak market conditions, the company cautioned against a weak start to the fiscal year. Heavy industry end markets including oil and gas have not yet stabilized, and Rockwell Automation foresees continued softness in key emerging markets. In the U.S., its largest market, a strong dollar is adversely affecting producers and OEMs. Moreover, weakness in the mining industry, lack of major projects also remain concerns.
Investors have thus been eagerly awaiting the company’s fiscal 2016 first quarter earnings report. Let’s have a quick look at the earnings release of this Milwaukee, WI-based provider industrial automation power, control, and information solutions.
Estimate Trend & Surprise History: The earnings estimate revisions for Rockwell Automation moved south prior to the earnings release. The Zacks Consensus Estimate for the first quarter of fiscal 2016 has gone down 1% over the past 30 days and currently stands at $1.34. As regards earnings surprise, Rockwell Automation outpaced the Zacks Consensus Estimate in three of the past four quarters, with an average beat of 3.37%.
Earnings: Rockwell Automation beat estimates by a margin of 11%. Our consensus called for first quarter fiscal 2016 EPS of $1.34, while the company reported EPS of $1.49.
Revenue: Rockwell Automation also beat on the revenue front. It reported first quarter fiscal 2016 revenues of $1,427 million, ahead of the Zacks Consensus Estimate of $1,388 million.
Key Developments to Note: Rockwell Automation lowered its fiscal 2016 adjusted EPS guidance to $5.70 to $6.20 from the previous range of $5.90 to $6.40. Revenues are now projected at $5.9 billion, lower than the prior expectation of $6.0 billion. This was driven by the decline in oil and commodity prices, weaker projections for economic growth including industrial production as well as currency headwinds.
Zacks Rank: Currently, Rockwell Automation has a Zacks Rank #4 (Sell). However, since the latest earnings performance is yet to be reflected in the estimate revisions, the rank is subject to change.
Market Reaction: Rockwell Automation’s shares were inactive following the release. It would be interesting to see how the market reacts to the results during the trading session today.
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