Manufacturers

Rockwell Automation Beats Q4 Earnings Estimates

MILWAUKEE — Rockwell Automation, Inc. reported fiscal 2016 fourth quarter sales of $1,538.6 million, down 4.3 percent from $1,607.5 million in the fourth quarter of fiscal 2015. Organic sales decreased 4.0 percent, acquisitions contributed 0.4 percent, and currency translation reduced sales by 0.7 percent.

On a GAAP basis, fiscal 2016 fourth quarter net income was $185.2 million or $1.43 per share, compared to $201.3 million or $1.50 per share in the fourth quarter of fiscal 2015. Pre-tax margin decreased to 15.4 percent from 17.3 percent in the same period last year.

Fiscal 2016 fourth quarter Adjusted EPS was $1.52, down 3 percent compared to Adjusted EPS of $1.57 in the fourth quarter of fiscal 2015. Total segment operating earnings were $304.3 million in the fourth quarter of fiscal 2016, down 9 percent compared to $335.8 million in the same period last year. Total segment operating margin was 19.8 percent compared to 20.9 percent a year ago. The Company recorded approximately $20 million of restructuring charges in the fourth quarter of fiscal 2016.

Full Fiscal Year 2016

Sales were $5,879.5 million in fiscal 2016, down 6.8 percent compared to $6,307.9 million in fiscal 2015. Organic sales decreased 3.9 percent, and currency translation reduced sales by 3.0 percent.

On a GAAP basis, fiscal 2016 net income was $729.7 million or $5.56 per share, compared to $827.6 million or $6.09 per share in fiscal 2015. Pre-tax margin decreased to 16.0 percent from 17.9 percent a year ago.

Fiscal 2016 Adjusted EPS was $5.93, down 7 percent compared to Adjusted EPS of $6.40 in fiscal 2015. Total segment operating earnings decreased to $1,188.7 million in fiscal 2016 compared to $1,360.5 million in fiscal 2015. Total segment operating margin decreased to 20.2 percent from 21.6 percent a year ago, primarily due to lower sales and unfavorable currency effects.

Commenting on the results, Blake D. Moret, president and chief executive officer, said, “The results for the last quarter of fiscal 2016 were a little better than our expectations. We saw positive year-over-year organic growth in the Architecture & Software segment for the first time this year, and some heavy industry markets appear to be stabilizing.

“For the full year, organic sales at minus 4 percent reflected challenging market conditions; however, I am pleased we were able to hold segment margin above 20 percent. I’m also pleased with our solid free cash flow performance and return on invested capital of 33 percent.

“I would like to especially thank our employees for their efforts and commitment to our customers during the year. Our employees and our partners are working every day to make our customers more competitive.”

Outlook

Commenting on the outlook, Moret added, “We saw solid sequential growth in our product businesses over the last two quarters that we project will continue into fiscal 2017. We expect heavy industries to be about flat year-over-year, with continued growth in our automotive and consumer verticals.”

The following table provides 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   $5.46 – $5.86
Organic sales growth 0% to 4% Adjusted EPS $5.85 – $6.25
Foreign currency impact ~ (0.5)%
Acquisitions impact ~ 1.5%
 

Moret continued, “To accelerate the execution of our strategy, we acquired three great companies during fiscal 2016. These acquisitions further strengthen our technology differentiation, increase our domain expertise, expand market access, and will contribute revenue growth in fiscal 2017.

“We will continue to invest in technology and domain expertise to expand the value we provide to our customers. I am confident in our strategy and our ability to execute.”

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

Architecture & Software

Architecture & Software fiscal 2016 fourth quarter sales were $696.4 million, an increase of 1.8 percent from $683.9 million in the same period last year. Organic sales increased 1.4 percent, acquisitions contributed 1.0 percent, and currency translation reduced sales by 0.6 percent. Segment operating earnings were $180.0 million in the fourth quarter of fiscal 2016 compared to $186.5 million in the fourth quarter of fiscal 2015. Segment operating margin decreased to 25.8 percent in the fourth quarter of fiscal 2016 from 27.3 percent a year ago, primarily due to unfavorable mix and higher restructuring charges.

Architecture & Software fiscal 2016 sales were $2,635.2 million, a decrease of 4.2 percent from $2,749.5 million last year. Organic sales declined 1.5 percent, acquisitions contributed 0.3 percent, and currency translation reduced sales by 3.0 percent. Segment operating earnings were $695.0 million in fiscal 2016 compared to $808.6 million in fiscal 2015. Segment operating margin was 26.4 percent in fiscal 2016 compared to 29.4 percent in fiscal 2015, primarily due to lower sales and unfavorable mix and currency effects.

Control Products & Solutions

Control Products & Solutions fiscal 2016 fourth quarter sales were $842.2 million, a decrease of 8.8 percent from $923.6 million in the same period last year. Organic sales decreased 8.0 percent, and currency translation reduced sales by 0.8 percent. Segment operating earnings were $124.3 million in the fourth quarter of fiscal 2016 compared to $149.3 million in the fourth quarter of fiscal 2015. Segment operating margin was 14.8 percent in the fourth quarter of fiscal 2016 compared to 16.2 percent a year ago, primarily due to lower sales, partially offset by productivity.

Control Products & Solutions fiscal 2016 sales were $3,244.3 million, a decrease of 8.8 percent from $3,558.4 million last year. Organic sales declined 5.8 percent, and currency translation reduced sales by 3.0 percent. Segment operating earnings were $493.7 million in fiscal 2016 compared to $551.9 million in fiscal 2015. Segment operating margin was 15.2 percent in fiscal 2016 compared to 15.5 percent a year ago.

Other Information

In the fourth quarter of fiscal 2016 cash flow provided by operating activities was $272.0 million and free cash flow was $235.4 million. Full fiscal year 2016 cash flow provided by operating activities was $947.3 million and free cash flow was $833.7 million. Return on invested capital was 33.0 percent.

Fiscal 2016 fourth quarter general corporate net expense was $25.2 million compared to $19.5 million in the fourth quarter of 2015. General corporate net expense was $79.7 million for the full fiscal year 2016 compared to $85.6 million in fiscal 2015.

On a GAAP basis, the effective tax rate for the fourth quarter of fiscal 2016 was 21.8 percent compared to 27.8 percent in the fourth quarter of 2015. The effective tax rate for the full fiscal year 2016 was 22.6 percent compared to 26.6 percent in fiscal 2015.

The Adjusted Effective Tax Rate for the fourth quarter of fiscal 2016 was 22.9 percent compared to 28.2 percent in the fourth quarter of 2015. The Adjusted Effective Tax Rate for the full fiscal year 2016 was 23.6 percent compared to 27.0 percent in fiscal 2015.

The lower tax rates for the fourth quarter were primarily due to a more favorable geographic mix of our pre-tax income. For the full fiscal year, the lower tax rates were primarily due to the benefit of the U.S. research and development tax credit, a more favorable geographic mix of our pre-tax income, and discrete tax items.

During the fourth quarter and full fiscal year 2016, the Company repurchased 1.1 million shares of its common stock at a cost of $130.1 million, and 4.6 million shares of its common stock at a cost of $500.2 million, respectively. As of September 30, 2016, $945.0 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.

 

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