Market Overview

Rockwell Automation Reports Fourth Quarter and Full Year 2019 Results; Provides Fiscal 2020 Guidance

Share:
  • Fourth quarter reported sales flat year over year; organic sales up 1.4 percent
  • Fourth quarter diluted EPS of $0.07; Adjusted EPS of $2.01
  • Full year diluted EPS of $5.83; Adjusted EPS of $8.67
  • Results include a restructuring charge of $0.14 and Sensia setup costs of $0.04 that were not included in July guidance
  • Fiscal 2020 EPS guidance: Diluted EPS $8.48 - $8.88; Adjusted EPS $8.70 - $9.10

 

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."

Fiscal 2019 fourth quarter sales were $1,730.2 million, flat compared to $1,729.5 million in the fourth quarter of fiscal 2018. Organic sales increased 1.4 percent, currency translation decreased sales by 1.5 percentage points, and an acquisition increased sales by 0.1 percentage points.

Fiscal 2019 fourth quarter net income was $8.1 million or $0.07 per share, compared to $345.9 million or $2.80 per share in the fourth quarter of fiscal 2018. The decreases in net income and EPS were primarily due to fair value adjustments in connection with the PTC investment ("the PTC adjustments"). Fiscal 2019 fourth quarter Adjusted EPS was $2.01, down 4 percent compared to $2.10 in the fourth quarter of fiscal 2018. Fourth quarter Adjusted EPS includes a restructuring charge of $0.14 and Sensia setup costs of $0.04.

Pre-tax margin was 3.3 percent in the fourth quarter of fiscal 2019, compared to 27.9 percent in the same period last year. The decrease in pre-tax margin was primarily due to the PTC adjustments.

Total segment operating margin was 20.2 percent compared to 20.8 percent a year ago. The decrease in total segment operating margin was primarily due to restructuring charges in both segments. Total segment operating earnings were $349.0 million in the fourth quarter of fiscal 2019, down 3 percent from $358.9 million in the same period of fiscal 2018.

Cash flow provided by operating activities in the fourth quarter of fiscal 2019 was $475.0 million and free cash flow was $450.9 million.

Full Fiscal Year 2019

Sales were $6,694.8 million in fiscal 2019, up 0.4 percent from $6,666.0 million in fiscal 2018. Organic sales increased 2.8 percent and currency translation decreased sales by 2.4 percentage points.

Fiscal 2019 net income was $695.8 million or $5.83 per share, compared to $535.5 million or $4.21 per share in fiscal 2018. The increase in EPS was primarily due to the absence of charges associated with the Tax Cuts and Jobs Act of 2017 (the "Tax Act") recognized in the prior year and a lower share count, partially offset by the PTC adjustments. Fiscal 2019 Adjusted EPS was $8.67, up 7 percent compared to $8.10 in fiscal 2018. The increase in Adjusted EPS was primarily due to higher organic sales.

Pre-tax margin was 13.5 percent in fiscal 2019, compared to 20.0 percent last year. The decrease in pre-tax margin was primarily due to the PTC adjustments.

Total segment operating margin was 22.0 percent compared to 21.6 percent a year ago. Total segment operating earnings were $1,473.6 million in fiscal 2019, up 2.2 percent from $1,441.8 million in fiscal 2018.

Cash flow provided by operating activities in fiscal year 2019 was $1,182.0 million and free cash flow was $1,049.2 million.

"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

The following table provides guidance as it relates to sales growth and earnings per share for fiscal 2020:

Sales Growth Guidance

 

EPS Guidance

Reported sales growth

 

2% - 5%

 

Diluted EPS

 

$8.48 - $8.88

Organic sales growth

 

(1.5)% - 1.5%

 

Adjusted EPS

 

$8.70 - $9.10

Inorganic sales growth1

 

~ 4%

 

 

 

 

Currency translation

 

~ (0.5)%

 

 

 

 

1Estimate for Sensia and MESTECH Services.

"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."

Following is a discussion of fourth quarter and full year results for both segments.

Architecture & Software

Architecture & Software fiscal 2019 fourth quarter sales were $781.2 million, an increase of 0.9 percent compared to $774.4 million in the same period last year. Organic sales increased 2.3 percent, currency translation decreased sales by 1.5 percentage points, and an acquisition increased sales by 0.1 percentage points. Segment operating earnings were $205.0 million in the fourth quarter of fiscal 2019 compared to $217.9 million in the same period last year. Segment operating margin decreased to 26.2 percent in the fourth quarter of fiscal 2019 from 28.1 percent a year ago due to lower volume leverage and restructuring.

Architecture & Software fiscal 2019 sales were $3,021.9 million, a decrease of 0.9 percent from $3,050.2 million last year. Organic sales increased 1.5 percent, currency translation decreased sales by 2.5 percentage points, and an acquisition increased sales by 0.1 percentage points. Segment operating earnings were $874.8 million in fiscal 2019 compared to $897.9 million in fiscal 2018. Segment operating margin decreased to 28.9 percent in fiscal 2019 from 29.4 percent a year ago.

Control Products & Solutions

Control Products & Solutions fiscal 2019 fourth quarter sales were $949.0 million, a decrease of 0.6 percent compared to $955.1 million in the same period last year. Organic sales increased 0.7 percent and currency translation decreased sales by 1.3 percentage points. Segment operating earnings were $144.0 million in the fourth quarter of fiscal 2019 compared to $141.0 million in the same period last year. Segment operating margin increased to 15.2 percent in the fourth quarter of fiscal 2019 from 14.8 percent a year ago.

Control Products & Solutions fiscal 2019 sales were $3,672.9 million, an increase of 1.6 percent from $3,615.8 million last year. Organic sales increased 3.8 percent, and currency translation decreased sales by 2.2 percentage points. Segment operating earnings were $598.8 million in fiscal 2019 compared to $543.9 million in fiscal 2018. Segment operating margin increased to 16.3 percent in fiscal 2019 from 15.0 percent a year ago, primarily due to higher sales.

Supplemental Information

General Corporate - Fiscal 2019 fourth quarter general corporate net expense was $36.4 million compared to $18.2 million in the fourth quarter of 2018 due to a favorable legal settlement recognized in the fourth quarter of 2018. General corporate net expense was $108.8 million for the full fiscal year 2019 compared to $100.0 million in fiscal 2018.

Tax - On a GAAP basis, the effective tax rate in the fourth quarter of fiscal 2019 was 85.6 percent compared to 28.2 percent in the fourth quarter of 2018. The increase is primarily due to the PTC adjustments. The effective tax rate for the full fiscal year 2019 was 22.8 percent compared to 59.8 percent in fiscal 2018. The decrease is primarily due to charges associated with the Tax Act in the prior year.

The Adjusted Effective Tax Rate for the fourth quarter of fiscal 2019 was 17.0 percent compared to 19.2 percent in the fourth quarter of 2018. The Adjusted Effective Tax Rate for the full fiscal year 2019 was 17.9 percent compared to 19.3 percent in fiscal 2018. The decrease in both the fourth quarter and full year was primarily related to the Tax Act.

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.

ROIC - Return on invested capital was 25.0 percent.

Non-GAAP Measures - Organic sales, total segment operating earnings, total segment operating margin, Adjusted Income, Adjusted EPS, Adjusted Effective Tax Rate, free cash flow, free cash flow conversion, and return on invested capital are non-GAAP measures that are reconciled to GAAP measures in the attachments to this release.

Conference Call

A conference call to discuss our financial results will take place at 8:30 a.m. Eastern Time on Tuesday, November 12, 2019. The call and related financial charts will be webcast and accessible via the Rockwell Automation website (https://www.rockwellautomation.com/investors/).

This news release contains statements (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Words such as "believe", "estimate", "project", "plan", "expect", "anticipate", "will", "intend" and other similar expressions may identify forward-looking statements. Actual results may differ materially from those projected as a result of certain risks and uncertainties, many of which are beyond our control, including but not limited to:

  • macroeconomic factors, including global and regional business conditions, the availability and cost of capital, commodity prices, the cyclical nature of our customers' capital spending, sovereign debt concerns and currency exchange rates;
  • laws, regulations and governmental policies affecting our activities in the countries where we do business, including those related to tariffs, taxation, and trade controls;
  • the availability and price of components and materials;
  • the successful execution of our cost productivity initiatives;
  • the availability, effectiveness and security of our information technology systems;
  • our ability to manage and mitigate the risk related to security vulnerabilities and breaches of our products, solutions and services;
  • the successful development of advanced technologies and demand for and market acceptance of new and existing hardware and software products;
  • our ability to manage and mitigate the risks associated with our solutions and services businesses;
  • competitive hardware and software products, solutions and services and pricing pressures, and our ability to provide high quality products, solutions and services;
  • disruptions to our distribution channels or the failure of distributors to develop and maintain capabilities to sell our products;
  • the successful integration and management of strategic transactions and achievement of the expected benefits of these transactions;
  • a disruption of our business due to natural disasters, pandemics, acts of war, strikes, terrorism, social unrest or other causes;
  • intellectual property infringement claims by others and the ability to protect our intellectual property;
  • the uncertainty of claims by taxing authorities in the various jurisdictions where we do business;
  • our ability to attract, develop, and retain qualified personnel;
  • the uncertainties of litigation, including liabilities related to the safety and security of the hardware and software products, solutions and services we sell;
  • risks associated with our investment in common stock of PTC Inc., including the potential for volatility in our reported quarterly earnings associated with changes in the market value of such stock;
  • our ability to manage costs related to employee retirement and health care benefits; and
  • other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission (SEC) filings.

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. To learn more about how we are bringing The Connected Enterprise to life across industrial enterprises, visit www.rockwellautomation.com.

ROCKWELL AUTOMATION, INC.

SALES AND EARNINGS INFORMATION

(in millions, except per share amounts)

 

 

 

Three Months Ended

September 30,

 

Twelve Months Ended

September 30,

 

 

2019

 

2018

 

2019

 

2018

Sales

 

 

 

 

 

 

 

 

Architecture & Software (a)

 

$

781.2

 

 

$

774.4

 

 

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