MILWAUKEE — Rockwell Automation, Inc. reported fiscal 2017 first quarter sales of $1,490.3 million, up 4.5 percent from $1,426.6 million in the first quarter of fiscal 2016. Organic sales grew 3.8 percent. Currency translation reduced sales by 1.1 percentage points, and acquisitions contributed 1.8 percentage points to sales growth.
Fiscal 2017 first quarter net income was $214.7 million or $1.65 per share, compared to $185.5 million or $1.40 per share in the first quarter of fiscal 2016. Fiscal 2017 first quarter Adjusted EPS was $1.75, up 17 percent compared to $1.49 in the first quarter of fiscal 2016. The increases in EPS and Adjusted EPS were primarily due to higher sales, strong margin performance and lower tax rates.
Pre-tax margin increased to 17.3 percent in the first quarter of fiscal 2017 from 16.6 percent in the same period last year. Total segment operating earnings were $316.6 million in the first quarter of fiscal 2017, up 7 percent from $295.9 million in the same period of fiscal 2016. Total segment operating margin was 21.2 percent compared to 20.7 percent a year ago. The increases in pre-tax margin and total segment operating margin were primarily due to higher sales and productivity, partially offset by higher incentive compensation.
Commenting on the results, Blake D. Moret, president and chief executive officer, said, “Four percent organic growth in the quarter is a great start to the fiscal year, better than we expected. We returned to organic growth in our largest market, the U.S., and we saw double-digit growth in emerging markets. I am also pleased with the contribution from recent acquisitions, along with our strong margin performance.”
Outlook
Commenting on the outlook, Moret added, “The macro environment remains consistent with our assumptions earlier in the fiscal year. Oil and commodity prices have been stable or have inched up, and our business in these markets has been relatively flat now for a few quarters. Recent projections continue to call for improving GDP and Industrial Production growth rates, as well as a higher level of capital expenditures. We therefore expect continued growth in the consumer and transportation verticals, and expect heavy industry end markets to be about flat year over year.
“Taking the macro outlook and our strong first quarter into consideration, we are increasing full-year organic sales guidance by one point across the range, and increasing EPS guidance by ten cents across the range.”
The following table provides updated guidance as it relates to sales growth and earnings per share for fiscal 2017:
| Sales Growth Guidance | EPS Guidance | |||||||
| Reported sales growth | 1% to 5% | Diluted EPS | $5.56 – $5.96 | |||||
| Organic sales growth | 1% to 5% | Adjusted EPS | $5.95 – $6.35 | |||||
| Foreign currency impact | ~ (2)% | |||||||
| Acquisition impact | ~ 1.5% | |||||||
Moret continued, “Strong underlying demand for our products enables us to accelerate investments this year in core technologies and domain expertise, and to expand the new value we are providing in Information Solutions and Connected Services. Together, these will further enhance our ability to bring The Connected Enterprise to life and profitably grow share at customers globally.
“I would like to thank our employees, partners and suppliers for their continued dedication in serving our customers.”
Following is a discussion of fiscal 2017 first quarter results for both segments.
Architecture & Software
Architecture & Software quarterly sales were $696.4 million, an increase of 8.3 percent compared to $642.9 million in the same period last year. Organic sales increased 7.6 percent, currency translation reduced sales by 1.0 percentage point, and acquisitions contributed 1.7 percentage points to sales growth. Segment operating earnings were $208.6 million compared to $176.2 million in the same period last year. Segment operating margin increased to 30.0 percent from 27.4 percent a year ago, primarily due to higher sales.
Control Products & Solutions
Control Products & Solutions quarterly sales were $793.9 million, an increase of 1.3 percent compared to $783.7 million in the same period last year. Organic sales increased 0.7 percent, currency translation reduced sales by 1.3 percentage points, and acquisitions contributed 1.9 percentage points to sales growth. Segment operating earnings were $108.0 million compared to $119.7 million in the same period last year. Segment operating margin decreased to 13.6 percent from 15.3 percent a year ago, primarily due to higher incentive compensation.
Other Information
In the first quarter of fiscal 2017 cash flow provided by operating activities was $310.8 million and free cash flow was $271.4 million. Return on invested capital was 34.6 percent.
Fiscal 2017 first quarter general corporate-net expense was $14.9 million compared to $18.0 million in the first quarter of fiscal 2016.
On a GAAP basis, the effective tax rate in the first quarter of fiscal 2017 was 16.7 percent compared to 21.7 percent in the first quarter of fiscal 2016. The Adjusted Effective Tax Rate for the first quarter of fiscal 2017 was 18.1 percent compared to 22.8 percent a year ago. The decreases in the effective tax rate and the Adjusted Effective Tax Rate were primarily due to larger favorable discrete tax items in the current quarter compared to the prior year. For fiscal 2017, the Company now expects an effective tax rate of approximately 22.5 percent and an Adjusted Effective Tax Rate of approximately 23.5 percent.
During the first quarter of fiscal 2017, the Company repurchased 646 thousand shares of its common stock at a cost of $80.8 million. At December 31, 2016, $864.2 million remained available under the existing share repurchase authorization.
Organic sales, total segment operating earnings, total segment operating margin, Adjusted Income, Adjusted EPS, Adjusted Effective Tax Rate, free cash flow and return on invested capital are non-GAAP measures that are reconciled to GAAP measures in the attachments to this release.
The full report can be viewed here.
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