On August 7, 2024, Rockwell Automation Inc (ROK, Financial) released its 8-K filing reporting its third quarter fiscal 2024 results. Rockwell Automation, a leading pure-play automation competitor, operates through three segments: intelligent devices, software and control, and lifecycle services. The company reported a decline in both sales and earnings, prompting an update to its fiscal 2024 guidance.
Performance Overview
Rockwell Automation Inc (ROK, Financial) reported third quarter sales of $2,051 million, down 8.4% from $2,239 million in the same period last year. The company attributed this decline to lower sales volume and unfavorable market conditions. Net income attributable to Rockwell Automation was $232 million, or $2.02 per share, a significant decrease from $400 million, or $3.45 per share, in the third quarter of fiscal 2023. Adjusted EPS was $2.71, down 10.0% year over year.
Segment Performance
The Intelligent Devices segment saw a slight decrease in sales to $957 million, down 1.1% year over year. However, segment operating earnings increased to $194 million, driven by positive price/cost and cost reduction actions.
The Software & Control segment experienced a significant decline in sales, down 31.8% to $512 million. Segment operating earnings also fell to $121 million, primarily due to lower sales volume.
Conversely, the Lifecycle Services segment reported an 11.8% increase in sales to $581 million, with segment operating earnings rising to $112 million, driven by higher sales volume and strong project execution.
Financial Achievements and Challenges
Despite the overall decline in sales, Rockwell Automation reported a 17% increase in total annual recurring revenue (ARR), highlighting the company's focus on growing its recurring revenue business. However, the company faced challenges such as weaker consumer demand, high interest rates, and policy uncertainty, which led to project delays and lower-than-expected order growth.
Updated Fiscal 2024 Guidance
Rockwell Automation updated its fiscal 2024 guidance, projecting reported sales growth to decline by approximately 8.5% and organic sales growth to decline by approximately 10.0%. The company also revised its diluted EPS guidance to approximately $8.32 and adjusted EPS guidance to approximately $9.60.
| Metric | Updated Guidance | Prior Guidance |
|---|---|---|
| Reported Sales Growth | ~ (8.5)% | (6.0)% - (4.0)% |
| Organic Sales Growth | ~ (10.0)% | (8.0)% - (6.0)% |
| Diluted EPS | ~ $8.32 | $8.80 - $9.80 |
| Adjusted EPS | ~ $9.60 | $10.00 - $11.00 |
Income Statement Highlights
Rockwell Automation's gross profit for the third quarter was $794.8 million, down from $915.4 million in the same period last year. The company's pre-tax margin decreased to 12.4% from 21.1% a year ago, primarily due to lower sales volume and restructuring charges.
Balance Sheet and Cash Flow
As of June 30, 2024, Rockwell Automation reported cash and cash equivalents of $406.7 million, down from $1,071.8 million at the end of September 2023. The company's total liabilities stood at $7,685.2 million, with shareowners' equity attributable to Rockwell Automation at $3,325.7 million.
Cash flow generated by operating activities in the third quarter was $279 million, compared to $282 million in the same period last year. Free cash flow was $238 million, slightly down from $240 million a year ago.
Commentary and Analysis
Rockwell delivered another quarter of good execution with sales, margin, and EPS all below our expectations. I’m particularly pleased with the progress we are making on driving productivity to support our long-term margin expansion targets," said Blake Moret, Chairman and CEO.
Despite the challenges, Rockwell Automation remains optimistic about its long-term prospects, focusing on productivity actions and pricing to drive margin growth. The company expects continued sequential order growth in the fourth quarter and into the next fiscal year, albeit at a more gradual pace than initially anticipated.
For more detailed insights and analysis, visit the full 8-K filing.
Explore the complete 8-K earnings release (here) from Rockwell Automation Inc for further details.
