Manufacturers

Rockwell Automation Reports Fiscal 2017 3Q Profit

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MILWAUKEE — Rockwell Automation, Inc. reported fiscal 2017 third quarter sales of $1,599.2 million, up 8.5 percent from $1,474.0 million in the third quarter of fiscal 2016. Organic sales grew 8.2 percent. Currency translation reduced sales by 0.9 percentage points, and acquisitions contributed 1.2 percentage points to sales growth.

Fiscal 2017 third quarter net income was $216.9 million or $1.67 per share, compared to $191.0 million or $1.46 per share in the third quarter of fiscal 2016. Fiscal 2017 third quarter Adjusted EPS was $1.76, up 14 percent compared to $1.55 in the third quarter of fiscal 2016.

Pre-tax margin was 17.3 percent in the third quarter of fiscal 2017 compared to 17.1 percent in the same period last year. Total segment operating margin was 21.1 percent, unchanged from a year ago. Total segment operating earnings were $337.0 million in the third quarter of fiscal 2017, up 8 percent from $311.0 million in the same period of fiscal 2016.

The increases in EPS, Adjusted EPS, pre-tax income, and total segment operating earnings were primarily due to higher sales, partially offset by higher incentive compensation.

Commenting on the results, Blake D. Moret, president and chief executive officer, said, “We had another quarter of strong sales and earnings performance. Organic sales grew 8 percent, in line with our expectations. EPS was up double digits for the third consecutive quarter, and free cash flow remained strong.

“I am pleased to see broad-based sales growth across regions and industries. Growth was led by double-digit increases in Asia Pacific and Latin America. The U.S., our largest market, was up 10 percent, including the contribution from acquisitions. Transportation, food and beverage, and semiconductor were strong.”

Outlook

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     ~ 7% Diluted EPS     $6.21 – $6.41
Organic sales growth ~ 6% Adjusted EPS $6.60 – $6.80
Currency translation ~ (0.5)%
Acquisitions ~ 1.5%
 

Commenting on the outlook, Moret added, “The macro environment remains solid. Our expectation for fiscal 2017 organic growth remains unchanged at approximately 6 percent. Taking into account a smaller headwind from currency, we now project our full-year sales to be about $6.3 billion. Based on our third quarter earnings performance we are increasing the Adjusted EPS guidance range to $6.60 to $6.80.”

Moret continued, “Our Connected Enterprise strategy is working and positions us well for the future. The pilots continue to deliver tangible results across multiple industries.”

Following is a discussion of fiscal 2017 third quarter results for both segments.

Architecture & Software

Architecture & Software quarterly sales were $731.9 million, an increase of 9.8 percent compared to $666.4 million in the same period last year. Organic sales increased 10.5 percent, currency translation reduced sales by 1.0 percentage points, and acquisitions contributed 0.3 percentage points to sales growth. Segment operating earnings were $204.3 million compared to $184.2 million in the same period last year. Segment operating margin increased to 27.9 percent from 27.6 percent a year ago.

Control Products & Solutions

Control Products & Solutions quarterly sales were $867.3 million, an increase of 7.4 percent compared to $807.6 million in the same period last year. Organic sales increased 6.3 percent, currency translation reduced sales by 0.8 percentage points, and acquisitions contributed 1.9 percentage points to sales growth. Segment operating earnings were $132.7 million compared to $126.8 million in the same period last year. Segment operating margin decreased to 15.3 percent from 15.7 percent a year ago.

Other Information

In the third quarter of fiscal 2017 cash flow provided by operating activities was $315.3 million and free cash flow was $285.2 million. Return on invested capital was 38.8 percent.

Fiscal 2017 third quarter general corporate-net expense was $16.5 million compared to $17.0 million in the third quarter of fiscal 2016.

On a GAAP basis, the effective tax rate in the third quarter of fiscal 2017 was 21.4 percent compared to 24.3 percent in the third quarter of fiscal 2016. The Adjusted Effective Tax Rate for the third quarter of fiscal 2017 was 22.4 percent compared to 25.1 percent a year ago. The lower tax rates were primarily due to favorable discrete items. For fiscal 2017, the Company now expects an effective tax rate of approximately 20 percent and an Adjusted Effective Tax Rate of approximately 21 percent.

During the third quarter of fiscal 2017, the Company repurchased 740 thousand shares of its common stock at a cost of $116.1 million. At June 30, 2017, $643.0 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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