Rockwell Automation CEO: ‘We’re in the early stages of a multiyear period of economic expansion’

Rockwell Automation CEO Blake Moret tells Yahoo Finance's Brian Sozzi about the outlook for industrial automation and information technology post-pandemic.

Video transcript

JARED BLIKRE: Welcome back. Rockwell Automation just beat on earnings and a forecast for adjusted earnings per share for 2022 beat the average Wall Street analyst markings for such a number. And we want to welcome into the stream here the CEO of Rockwell Automation, Blake Moret, along with Yahoo Finance's Brian Sozzi. Brian, I'm going to turn this interview over to you.

BRIAN SOZZI: All right, thanks, Jared. Blake, always good to speak with you here. Good quarter out of Rockwell Automation. What inning do you think we are in the industrial recovery, as we try to recover from the pandemic?

BLAKE MORET: Brian, it's great to talk with you. I think we're in the early innings. I think we're in the early stages of a multi-year period of economic expansion. And while supply chain constraints are real and we're dealing with them like other manufacturers, we think that we're in for a good run of economic expansion.

BRIAN SOZZI: Where are you seeing the biggest supply chain constraints right now?

BLAKE MORET: You know, it's electronic components. We're not seeing the supply chain constraints crimp demand from our customers. We're seeing historic orders quarter after quarter. But within our own operations, because we produce so many smart products, the chips are where the pinch point is.

BRIAN SOZZI: A number that stood out to me, Blake, is if I have it right, $2.9 billion. That's how much backlog you have right now. What are your customers ordering for you? And where are your biggest-- where is most of that backlog concentrated?

BLAKE MORET: So most of that backlog-- and you do have the right number. Most of that backlog is concentrated in our intelligent product. So those are the high volumes of the components that are used on the factory floor for the basic automation. It's also where the data is born for the coordinated systems in these applications. About a little less than half of the backlog is also in the more engineered solutions that have a little bit longer lead times.

BRIAN SOZZI: Are you hearing from your customers that they're coming to you and saying, Blake, I just can't find humans. I can't hire them. I'm offering higher wages. They just don't want to sign on. Can you build me something that will just take away that need to find workers?

BLAKE MORET: You know, I think certainly labor shortages are very real, and they manifest themselves in driving increased demand for automation and robotics. Being able to have the people that manufacture does have-- be able to use their talents and have a broader impact by amplifying it, if you will, through the automation. And then it's also putting the focus on being a good destination for talent because that talent does have many choices. And so we within Rockwell are focusing on being the very best destination for that talent to want to come and do their best.

BRIAN SOZZI: Tech by its very nature, Blake, is a deflationary force, I think, but what type of inflation are you seeing in your business? And when do you see inflation levels in the global economy coming back down to some reality?

BLAKE MORET: Yeah. First of all, you know, the inflation is not going to go in the opposite direction. I think we'll see a moderation of the rate of increase, but we're not going to see wages go down below where they currently are in high demand jobs. And with a lot of the component price increases, I don't expect in any near term horizon that we're going to see prices reduce. We're just not going to see the same rate of increase out there.

It runs the continuum of, you know, single digit increases. In some cases, you see, you know, much larger price increases with the scarcest components. And then in terms of labor, you know, certain jobs are in particularly high demand. In the manufacturing environment, software developers, you know, experienced customer facing resources, these are all areas that are in very high demand.

BRIAN SOZZI: Throughout the day, Blake, we've been highlighting companies hiring veterans into their workforce. I know this is a very important issue to you. What are you doing on that front?

BLAKE MORET: So we developed a program a few years back that continues to run today, where we're offering returning veterans an opportunity to go through a 12-week hands-on training program to equip them with technician level skills that are really prized within manufacturers across the country.

So if they have some experience with technical equipment and we can determine that through their MOS, their occupational specialty, then we can provide them for free that 12-week training. And we have the connections with the manufacturers who are looking for just that talent. So we make the matches, and those veterans go on to fulfill very highly prized and good paying jobs in plants across the country.

BRIAN SOZZI: Well, good to see what you're doing on that front. Rockwell Automation CEO Blake Moret, always good to see you. Have a great rest of the week. Jared, back to you.