Rockwell Q1 Beats on Revenue, Maintains Guidance

MILWAUKEE — Rockwell Automation, Inc. today reported fiscal 2020 first quarter results.

“Despite a difficult macro environment for manufacturers, first quarter sales and Adjusted EPS were slightly better than we expected. We saw growth in Automotive and Semiconductor as well as strength in China. Our first quarter sales also included strong double-digit growth in Information Solutions and Connected Services and a significant contribution from our inorganic investments.” said Blake D. Moret, Chairman and CEO. “Our balance sheet remains strong, and we continue to look for opportunities to accelerate progress on our strategic priorities.”

Fiscal 2020 first quarter sales were $1,684.5 million, up 2.6 percent from $1,642.3 million in the first quarter of fiscal 2019. Organic sales declined 1.0 percent, currency translation decreased sales by 0.9 percentage points, and acquisitions increased sales by 4.5 percent.

Fiscal 2020 first quarter net income attributable to Rockwell Automation was $310.7 million or $2.66 per share, compared to $80.3 million or $0.66 per share in the first quarter of fiscal 2019. The increases in net income attributable to Rockwell Automation and EPS were primarily due to fair-value adjustments recognized in the first quarter of fiscal 2020 and 2019 in connection with our investment in PTC (the “PTC adjustments”). Fiscal 2020 first quarter Adjusted EPS was $2.11, down 5 percent compared to $2.21 in the first quarter of fiscal 2019. The decrease in Adjusted EPS was primarily due to lower organic sales, higher investment spending, and unfavorable mix, partially offset by a lower share count and lower tax rate. The net year-over-year Adjusted EPS impact of Sensia was $0.01.

Pre-tax margin was 19.9 percent in the first quarter of fiscal 2020 compared to 7.4 percent in the same period last year. The increase in pre-tax margin was due to the PTC adjustments.

Total segment operating margin was 20.1 percent compared to 22.8 percent a year ago. The decrease in total segment operating margin was primarily due to Sensia one-time items, higher investment spending, and unfavorable mix. Total segment operating earnings were $339.1 million in the first quarter of fiscal 2020, down 9.5 percent from $374.9 million in the same period of fiscal 2019.

Cash flow provided by operating activities in the first quarter of fiscal 2020 was $231.1 million, compared to $212.0 million in the first quarter of fiscal 2019. Free cash flow was $194.1 million, compared to $170.0 million in the first quarter of fiscal 2019.

Outlook

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

¹Estimate for Sensia, MESTECH Services, and Avnet Data Security.

“The macro-environment is showing signs of stabilization, and I am confident in our ability to execute and gain share as we build long-term value for our customers, shareowners, and employees,” Moret added, commenting on the outlook. “In the quarter, we had significant new wins across our Connected Enterprise portfolio as we guide customers on their digital transformation journeys. We are at the forefront of the convergence of IT and OT. This is an exciting time for Rockwell as we extend our leadership position as an industrial technology company,” Moret concluded.

Architecture & Software

Architecture & Software quarterly sales were $751.6 million, a decrease of 0.2 percent compared to $753.1 million in the same period last year. Organic sales increased 0.7 percent, currency translation decreased sales by 1.0 percentage point, and an acquisition increased sales by 0.1 percentage points. Segment operating earnings were $223.7 million compared to $237.0 million in the same period last year. Segment operating margin decreased to 29.8 percent from 31.5 percent a year ago primarily due to higher investment spending.

Control Products & Solutions

Control Products & Solutions quarterly sales were $932.9 million, an increase of 4.9 percent compared to $889.2 million in the same period last year. Organic sales decreased 2.5 percent, currency translation decreased sales by 0.8 percent, and inorganic investments increased sales by 8.2 percent. Segment operating earnings were $115.4 million compared to $137.9 million in the same period last year. Segment operating margin decreased to 12.4 percent from 15.5 percent a year ago primarily due to Sensia one-time items, unfavorable mix, and lower organic sales. Sensia had a year-over-year negative impact of 140 basis points on segment operating margin.

Supplemental Information

General Corporate Net – Fiscal 2020 first quarter general corporate-net expense was $32.8 million compared to $21.9 million in the first quarter of fiscal 2019. The increase was primarily due to benefit-related adjustments and one-time costs related to Sensia.

Purchase Accounting Depreciation and Amortization – Fiscal 2020 first quarter purchase accounting depreciation and amortization expense was $10.0 million, up $5.9 million from the first quarter of fiscal 2019, resulting in a year-over-year decrease in Adjusted EPS of $0.02.

Tax – On a GAAP basis, the effective tax rate in the first quarter of fiscal 2020 was 5.7 percent compared to 33.5 percent in the first quarter of fiscal 2019. The lower effective tax rate in the first quarter of fiscal 2020 was primarily due to the PTC adjustments, a tax benefit related to Sensia, and other discrete items. The Adjusted Effective Tax Rate for the first quarter of fiscal 2020 was 7.9 percent compared to 18.7 percent in the prior year. The lower Adjusted Effective Tax Rate in 2020 is primarily due to a tax benefit related to Sensia and other discrete items.

Share Repurchases – During the first quarter of fiscal 2020, the Company repurchased 0.5 million shares of its common stock at a cost of $100.0 million. At December 31, 2019, $1.0 billion remained available under our existing share repurchase authorizations.

ROIC – Return on invested capital was 32.9 percent.