Maintaining Hold on Rockwell Automation Amid Q2 Earnings Beat and Revised FY24/25 Guidance

Analyst Andrew Obin of Bank of America Securities reiterated a Hold rating on Rockwell Automation (ROK – Research Report), retaining the price target of $300.00.

Andrew Obin has given his Hold rating due to a combination of factors including the performance of Rockwell Automation in the second fiscal quarter of 2024 and the lowered earnings guidance for the year. The Q2 earnings exceeded expectations even after adjusting for a one-time benefit, and the Intelligent Devices & Software and Control segments showed better growth. However, management’s revised earnings guidance reflects a slower-than-anticipated pace of machine builder destocking and some project delays in the EV and Food and Beverage sectors. This adjustment, along with uncertainties regarding the destocking process and timing of large-scale projects, has led to a reduction in earnings estimates for FY24 and FY25, though a reasonable path to $14+ in earnings by 2025 is still seen.
The report also considers the operational emphasis on margins and cost savings as positive for Rockwell Automation. To reach the projected earnings, an increase in orders by the fourth quarter of FY24 is crucial, as suggested by the company’s expectations of high teens sequential growth. However, observations from industry shows like the Automate Show indicate a lack of short-term visibility for order activity, raising concerns about the timing and realization of anticipated mega-project orders. This uncertain outlook on order growth and timing contributes to the decision to maintain a Neutral stance despite the potential for future earnings improvements.

According to TipRanks, Obin is a 5-star analyst with an average return of 12.3% and a 65.14% success rate. Obin covers the Industrials sector, focusing on stocks such as Honeywell International, Eaton, and Vertiv Holdings.

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Rockwell Automation (ROK) Company Description:

Wisconsin-based Rockwell Automation, Inc. provides industrial automation and digital transformation. The company operates through three segments: Intelligent Devices, Software & Control, Lifecycle Services.