- Morgan Stanley analyst Joshua Pokrzywinski reiterated an Overweight rating on the shares of Rockwell Automation Inc ROK and raised the price target from $284 to $335.
- Near-shoring remains one of the more topical market themes, but ROK's supply chain issues have held back performance up to this quarter, said the analyst.
- With a significant backlog looking less likely to be canceled, and resilient near-term order rates, the analyst sees a significant upside to consensus over the next two years and expects limited cyclical multiple compression.
- Overall, the analyst continues to see ROK's backlog and structural changes in customer behavior collectively providing the visibility to grow through an IP slowdown.
- The analyst further expects automation content in capex spending to grow as labor supply and technology adoption support the willingness and ability to automate and customize product categories historically deemed too expensive.
- Also Read: Rockwell Automation Q1 Earnings Top Estimates; Boosts FY23 Forecast
- ROK noted both orders and backlog were up sequentially, a sign of continued manufacturing capex/ nearshoring demand, the analyst said.
- Within FY23 revenue guidance, ROK expects all of its markets (i.e. Discrete, Process, and Hybrid) to grow low-teens, representing an improvement in Discrete and Hybrid vs. prior guidance, cited the analyst.
- The analyst said there is a continued conviction in a generational capex cycle despite a slowing macro environment and choppy supply chain.
- The analyst expects orders to remain healthy as other verticals, both consumer and other short-cycle industrial markets, contend with demand destruction from rising rates and persistent inflation.
- Price Action: ROK shares are trading higher by 0.27% at $282.64 on the last check Friday.
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