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Category: Stock Market and Rockwell Automation
Date: 18 November 2019 Stock Price: $200.27 We take a look at the 4th quarter 2019 earnings report of Rockwell automation, a supplier of industrial automation and digital transformation services to customers in over 100 countries.
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About Rockwell Automation
Rockwell Automation, Inc. (NYSE: ROK), is a global leader in industrial automation and digital transformation. We connect the imaginations of people with the potential of technology to expand what is humanly possible, making the world more productive and more sustainable. Headquartered in Milwaukee, Wisconsin, Rockwell Automation employs approximately 23,000 problem solvers dedicated to our customers in more than 100 countries.
Overview of Rockwell's 4th quarter 2019 earnings report
The data below refers to the latest quarter unless specified otherwise:
- Total sales: $1.73 billion (up slightly from $1.729 billion from the same quarter of the previous year)
- Total sales increased by 0.05% over the last 12 months
- Cost of sales: $1.007 billion (up from $993.4 million for the same quarter of the previous year)
- Cost of sales increased by 1.3% over the last 12 months.
- Net income: $8.1 million (down from $345.9 million for the same quarter of the previous year)
- Diluted earnings per share: $0.07 (down from $2.1 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 117 million (down from 123.5 million for the same quarter of the previous year)
- Cash and cash equivalents: $1.018 billion
- Cash and cash equivalents per share: 8.70
- Cash and cash equivalents makes up 4.3% of Rockwell Automation's market capital
- Cash and cash equivalents makes up 16.7% of Rockwell Automation's total assets
- Stockholders equity in Rockwell Automation: $404 million
- Stockholders equity per Rockwell Automation share: $3.54
- Rockwell Automation is trading at56 times its shareholders equity which is well outside the expected range of between 2 and 4 times that most firms tend to trade at
- Cash generated from operation (for the full fiscal year): $1.182 billion
- Cash generated from operations per share (for the full fiscal year): $10.10
Rockwell Automation's management commentary on their 4th quarter 2019 earnings report
MILWAUKEE--(BUSINESS WIRE)-- Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2019 fourth quarter results.
"Our broadening portfolio helped deliver better-than-expected performance in the quarter," said Blake D. Moret, chairman and chief executive officer of Rockwell Automation. "Organic sales growth of 1.4 percent was driven by continued strength in oil and gas, mining, and life sciences, as well as better performance in automotive and food and beverage."
"We are pleased with our solid operating and financial performance for the year against the backdrop of a challenging macroeconomic environment. Organic sales grew 2.8 percent, supported by strong double-digit growth in Information Solutions and Connected Services, total segment operating margin expanded 40 basis points and Adjusted EPS was up 7 percent. We also delivered another year of strong free cash flow performance and successfully neutralized the impact of tariffs. We continue to find new ways to increase productivity for our customers as we play a larger role in their digital transformation journey," said Moret.
"Our broadening portfolio helped deliver better-than-expected performance in the quarter," said Blake D. Moret, chairman and chief executive officer of Rockwell Automation. "Organic sales growth of 1.4 percent was driven by continued strength in oil and gas, mining, and life sciences, as well as better performance in automotive and food and beverage."
"We are pleased with our solid operating and financial performance for the year against the backdrop of a challenging macroeconomic environment. Organic sales grew 2.8 percent, supported by strong double-digit growth in Information Solutions and Connected Services, total segment operating margin expanded 40 basis points and Adjusted EPS was up 7 percent. We also delivered another year of strong free cash flow performance and successfully neutralized the impact of tariffs. We continue to find new ways to increase productivity for our customers as we play a larger role in their digital transformation journey," said Moret.
Outlook for fiscal 2020
"Looking forward to 2020, our outlook balances geopolitical uncertainty with confidence in our differentiated portfolio and ability to gain share. Furthermore, cost savings from our fiscal 2019 fourth quarter restructuring actions allow us to reinvest in our highest growth opportunities. We will complement organic investments with inorganic opportunities that best align with our strategy. We are expecting another year of double-digit growth in Information Solutions and Connected Services, and we’re happy that Sensia, our oil and gas joint venture with Schlumberger, is open for business and taking orders. Now more than ever, technology-driven productivity from both new and existing wells is a top priority for producers around the world," said Moret.
“I want to thank our employees, partners, and suppliers for their contributions this year,” concluded Moret. “Their dedication makes a difference and continues to add value to our Company every day.”
Share Repurchases
During the fourth quarter and full fiscal year 2019, the Company repurchased 1.4 million shares of its common stock at a cost of $224.9 million, and 6.1 million shares of its common stock at a cost of $1.0 billion, respectively. At September 30, 2019, $1.1 billion remained available under our existing share repurchase authorizations.
- Diluted earnings per share: $8.48 - $8.88
- Adjusted earnings per share: $8.70 -$9.10
- Reported sales growth 2% - 5%
"Looking forward to 2020, our outlook balances geopolitical uncertainty with confidence in our differentiated portfolio and ability to gain share. Furthermore, cost savings from our fiscal 2019 fourth quarter restructuring actions allow us to reinvest in our highest growth opportunities. We will complement organic investments with inorganic opportunities that best align with our strategy. We are expecting another year of double-digit growth in Information Solutions and Connected Services, and we’re happy that Sensia, our oil and gas joint venture with Schlumberger, is open for business and taking orders. Now more than ever, technology-driven productivity from both new and existing wells is a top priority for producers around the world," said Moret.
“I want to thank our employees, partners, and suppliers for their contributions this year,” concluded Moret. “Their dedication makes a difference and continues to add value to our Company every day.”
Share Repurchases
During the fourth quarter and full fiscal year 2019, the Company repurchased 1.4 million shares of its common stock at a cost of $224.9 million, and 6.1 million shares of its common stock at a cost of $1.0 billion, respectively. At September 30, 2019, $1.1 billion remained available under our existing share repurchase authorizations.
Rockwell Automation (NYSE: ROK) stock price history
The image below, obtained from Google, shows the stock price history of Rockwell Automation (NYSE: ROK) for the last 5 years. And its been a very good time for Rockwell Automation stockholders. 5 years ago the stock was trading around $114vand today its trading at $200.27. That's a strong return of 50.4% provided to Rockwell Automation stockholders. The stock of Rockwell Automation is currently trading at a lot closer to its 52 week high of $207.11 than it is to its 52 week low of $141.46 which to us is a clear indication that the short term sentiment and momentum of Rockwell Automation stock is positive
Recent coverage of Rockwell Automation (NYSE: ROK)
The extract below shows recent coverage of Rockwell Automation as obtained from TheStreet.com
During Tuesday's Mad Money program, Jim Cramer commented that some investors saw Rockwell Automation's (ROK) 1.4% growth as proof positive that our industrial economy is slowing. Most investors, however, saw the strong earnings as a huge win and sent shares up 10.5% by the close. In this daily bar chart of ROK, below, we can see how prices made a dramatic breakout over the high made back in April. Prices gapped up on very heavy turnover. ROK was already above the rising 50-day moving average line as well as the rising 200-day line. The shorter 50-day moving average line has moved above the slower-to-react 200-day line for a bullish golden cross. Obviously this buy signal came late but it can still be effective in long-trending markets.
The daily On-Balance-Volume (OBV) line has been strong from early October and signals that buyers of ROK have been more aggressive for a number of weeks before their earnings report. The trend-following Moving Average Convergence Divergence (MACD) oscillator is pointed up and has been bullish since early September.
Read the full article here
During Tuesday's Mad Money program, Jim Cramer commented that some investors saw Rockwell Automation's (ROK) 1.4% growth as proof positive that our industrial economy is slowing. Most investors, however, saw the strong earnings as a huge win and sent shares up 10.5% by the close. In this daily bar chart of ROK, below, we can see how prices made a dramatic breakout over the high made back in April. Prices gapped up on very heavy turnover. ROK was already above the rising 50-day moving average line as well as the rising 200-day line. The shorter 50-day moving average line has moved above the slower-to-react 200-day line for a bullish golden cross. Obviously this buy signal came late but it can still be effective in long-trending markets.
The daily On-Balance-Volume (OBV) line has been strong from early October and signals that buyers of ROK have been more aggressive for a number of weeks before their earnings report. The trend-following Moving Average Convergence Divergence (MACD) oscillator is pointed up and has been bullish since early September.
Read the full article here
Rockwell Automation (NYSE: ROK) latest stock valuation
So based on the 4th quarter 2019 earnings report of Rockwell Automation (NYSE: ROK) what do we value Rockwell Automation stock at? Based on the earnings reported and the fiscal guidance provided our valuation model provides a target (full value) price for Rockwell Automation at $169.80 a stock.
We therefore feel that the stock is overvalued and a good price long term fundamental or value investors should look to enter the stock at is at least 10% below our target (full value) price which in this case is $169.80 We therefore believe a good entry point into Rockwell Automation's stock would be around $152.80 or below. We expect the stock of Rockwell Automation to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
We therefore feel that the stock is overvalued and a good price long term fundamental or value investors should look to enter the stock at is at least 10% below our target (full value) price which in this case is $169.80 We therefore believe a good entry point into Rockwell Automation's stock would be around $152.80 or below. We expect the stock of Rockwell Automation to pull back from current levels to levels closer to our target (full value) price in coming weeks and months.
Next earnings release of Rockwell Automation
It is expected that Rockwell Automation will release their 1st quarter 2020 earnings report in mid February 2020