Rockwell Automation: Q4 Revenue Miss, but Stock Soars on Strong EPS



Highlights:

- Revenue: $1.88 billion, missing estimates by 0.6% (8.3% YoY decline)
- Adjusted EPS: $1.83, exceeding estimates by 16%
- Adjusted EBITDA: $286 million, below estimates by 8.1% (15.2% margin)
- Management maintained full-year Adjusted EPS guidance of $9.20
- Operating Margin: 17.1%, up from 13.7% in Q4 2023
- Free Cash Flow: $293 million, up from -$35.3 million in Q4 2023
- Organic Revenue: 7.6% YoY decline (1% YoY growth in Q4 2023)

Company Overview:

Rockwell Automation (NYSE: ROK) is a leading industrial automation company, providing solutions to enhance efficiency in customer machinery.

Industry Outlook:

Industrial Internet of Things (IoT) companies benefit from the trend towards global connectivity. Specialization in areas like factory automation, fleet tracking, and smart home technologies can drive recurring subscription revenues and margin expansion. However, underperformance in invested technologies can necessitate costly pivots.

Sales Growth:

Over the past five years, Rockwell Automation's sales growth of 3.7% compounded annually has fallen short of industry benchmarks. Recently, annualized revenue growth of 1.3% over the past two years indicates a slowdown in demand. Organic revenue growth averaged 1.7% YoY over the same period.

Profitability:

Rockwell Automation has maintained an average operating margin of 17% over the past five years. While this margin decreased by 2.3 percentage points over the period, it improved in Q4 2024 to 17.1% (up 3.4 percentage points YoY).

Earnings Per Share (EPS):

EPS growth of 1.8% compounded annually over the past five years has been lower than revenue growth. EPS declined by 1.7% annually over the past two years. Despite a YoY decline in Q4 2024, EPS of $1.83 exceeded estimates and is projected to grow 2.7% over the next 12 months.

Key Takeaways:

Rockwell Automation's mixed Q4 results included an EPS beat and a revenue miss. The stock surged 6.2% following the report despite the revenue shortfall. While the company maintains its EPS guidance, the overall performance was somewhat below market expectations.