What's in Store for Rockwell Automation (ROK) in Q2 Earnings?

Rockwell Automation Inc. ROK is scheduled to report second-quarter fiscal 2019 results before the opening bell on Apr 25.
 
In the last reported quarter, the company delivered earnings of $2.21 per share that beat the Zacks Consensus Estimate by 12%. The figure also improved 13% year over year. Notably, its earnings surpassed estimates in the trailing four quarters, the average beat being 6.74%.
 
Let’s see how things are shaping up for this announcement.

Rockwell Automation, Inc. Price and EPS Surprise

 

Rockwell Automation, Inc. Price and EPS Surprise

Rockwell Automation, Inc. price-eps-surprise | Rockwell Automation, Inc. Quote

Key Factors to Consider

Global industrial capital spending is on the rise and anticipated to continue to be a tailwind in the to-be-reported quarter. Per the Institute for Supply Management, Purchasing Managers’ Index (PMI) for March rose to 55.3% from February’s reading of 54.2%. This indicates strong growth in manufacturing for the 31st consecutive month, led by continued expansion in new orders, production activity and employment. The average PMI was 54.4% between January and March 2019. Notably, a reading above 50% indicates expansion in the manufacturing sector.

Heavy industries performed well in the last reported quarter, led by semiconductor, metals and mining. The momentum is likely to continue for Rockwell Automation in the second quarter of fiscal 2019, driven by growth in emerging markets. Growth of the middle class continues to create demand for semiconductor and other heavy industries.

Strong domestic and foreign demand in India is anticipated to sustain continued manufacturing growth. However, Rockwell Automation’s operations will be negatively impacted in Europe as the economy is affected by slowing export growth, driven by strong euro against emerging market currencies and escalating oil prices.

However, Rockwell Automation’s results in second-quarter fiscal 2019 will likely continue to bear the brunt of tariffs. The company expects to offset the impact through the implementation of supply-chain alternatives, negotiations with vendors and price adjustments on effective products.

The Zacks Consensus Estimate for revenues for the fiscal second quarter is pegged at $1.72 billion, depicting year-over-year rise of 4%. The Zacks Consensus Estimate for earnings is pegged at $2.11, reflecting a year-over-year improvement 11.6%.
 
The Zacks Consensus Estimate for the Architecture & Software segment’s net sales is pegged at $784 million, depicting year-over-year rise of 2%. Sales estimates for the Control Products & Solutions segment are pegged at $927 million, marking an increase of 5% over the prior-year quarter.
 
The Zacks Consensus Estimate for the Architecture & Software segment’s operating profit is pegged at $226 million, which reflects a 4% year-over-year improvement. Operating profit for the Control Products & Solutions segment is expected to improve around 7% year over year to $136 million.
 
Earnings Whispers

Our proven model does not conclusively show a beat for Rockwell Automation this earnings season as it does not possess the key components. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:

Earnings ESP: Earnings ESP for Rockwell Automation is +1.13%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $2.13 and $2.11, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Rockwell Automation currently carries a Zacks Rank #4 (Sell). Notably, we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Share Price Performance

 

Over the past year, Rockwell Automation has gained around 7% while the industry recorded 10% growth.
 
Other Stocks Worth a Look

Here are a few other companies that you may want to consider, as our model shows these too have the right combination of elements to post an earnings beat this quarter:

Valmont Industries, Inc. VMI has an Earnings ESP of +11.60% and it currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axon Enterprise, Inc. AAXN has an Earnings ESP of +6.99% and carries a Zacks Rank #3 at present.

Dover Corporation DOV has an Earnings ESP of +0.25% and it presently carries a Zacks Rank #3.

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Rockwell Automation, Inc. (ROK) : Free Stock Analysis Report
 
Dover Corporation (DOV) : Free Stock Analysis Report
 
Valmont Industries, Inc. (VMI) : Free Stock Analysis Report
 
Axon Enterprise, Inc (AAXN) : Free Stock Analysis Report
 
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