Rockwell Automation Q4 Earnings & Sales Beat Estimates

MILWAUKEE — Rockwell Automation, Inc. 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:

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.