Why Rockwell Automation Shares Are Falling Tuesday

Rockwell Automation, Inc. ROK shares are trading lower after it reported second-quarter results and cut its FY24 outlook.

Sales fell 6.6% Y/Y to $2.13 billion, beating the consensus of $2.06 billion. Organic sales decreased by 8.1% in the quarter.

Segment Details: Intelligent Devices sales declined 4.9% Y/Y to $974 million, Software & Control fell 23.1% Y/Y to $570 million, and Lifecycle Services climbed 14.0% Y/Y to $583 million.

Total ARR grew 20%, and organic ARR rose 17% Y/Y in the quarter. Total segment operating earnings were $404 million in the second quarter of fiscal 2024, down 16.5% Y/Y. Total segment operating margin was 19.0% compared to 21.3% a year ago.

Adjusted EPS was $2.50, beating the analyst consensus of $2.16.

The company held $470.3 million in cash and equivalents as of March-end. 

In the second quarter, the company bought back around 0.7 million shares for $194.7 million. As of March-end, the company had $0.6 billion worth of shares remaining available under the existing share repurchase authorization.

FY24 Outlook: Rockwell cut the guidance for adjusted EPS from $12.00-$13.50 to $10.00-$11.00 (vs. $11.93 estimate), with reported sales growth guidance to (6.0)% – (4.0)% (from 0.5% – 6.5% earlier) and organic sales growth to (8.0)% – (6.0)% from (2.0)% – 4.0% prior.

Blake Moret, Chairman and CEO, said, “Execution in the second quarter was solid, and we continue to see sequential order improvement. However, there is more excess inventory at our customers, particularly machine builders, than we originally expected.” 

“As a result, we are not yet seeing the accelerated order ramp this fiscal year and are reducing our full-year guidance. Despite the lower FY24 outlook, we are gaining share across many of our most important product lines and in North America, our largest market.”

Also, Rockwell disclosed the retirement of Nicholas Gangestad as Senior Vice President and Chief Financial Officer of the company. The company is searching for his replacement, and Gangestad will continue to serve in his role until the new CFO is appointed. 

Investors can gain exposure to the stock via Gabelli Automation ETF GAST and ProShares S&P Kensho Smart Factories ETF MAKX.

Price Action: ROK shares are down 2.09% at $271.60 at the last check Tuesday.

Photo via Shutterstock