Manufacturers

Rockwell Automation Reports High Earnings, Sales in 2Q

MILWAUKEE — Rockwell Automation, Inc. today reported fiscal 2018 second quarter sales of $1,651.2 million, up 6.2 percent from $1,554.3 million in the second quarter of fiscal 2017. Organic sales grew 3.5 percent. Currency translation increased sales by 3.9 percentage points, and the prior year divestiture reduced sales by 1.2 percentage points.

Fiscal 2018 second quarter net income was $227.4 million or $1.77 per share, compared to net income of $189.5 million or $1.45 per share in the second quarter of fiscal 2017. Fiscal 2018 second quarter Adjusted EPS was $1.89, up 22 percent compared to $1.55 in the second quarter of fiscal 2017. The increases in EPS and Adjusted EPS were primarily due to higher sales.

Pre-tax margin was 18.1 percent in the second quarter of fiscal 2018 compared to 14.8 percent in the same period last year. Total segment operating margin was 20.9 percent compared to 19.0 percent a year ago. The increases in pre-tax margin and total segment operating margin were primarily due to higher sales. Total segment operating earnings were $345.1 million in the second quarter of fiscal 2018, up 17 percent from $296.0 million in the same period of fiscal 2017.

Commenting on the results, Blake D. Moret, chairman and chief executive officer, said, “Demand for the quarter was fairly broad based across regions and verticals, enabling us to achieve organic sales growth of 3.5 percent, as we expected. Growth was led by heavy industries, including oil and gas, mining, metals, and semiconductor. Results were also strong in Information Solutions and Connected Services, which represent new value from the Connected Enterprise, and again grew double digits. I am also pleased with our 22 percent Adjusted EPS growth in the quarter and our very strong free cash flow performance, which positions us well for key growth investments and continued capital returns in 2018.”

Outlook

Commenting on the outlook, Moret added, “The global manufacturing environment remains favorable and macroeconomic indicators are positive. Taking our strong first half results and the macro outlook into consideration, we still expect fiscal 2018 organic sales growth to be in the range of 3.5 percent to 6.5 percent and project fiscal 2018 reported sales of approximately $6.7 billion at the midpoint. We are increasing our Adjusted EPS guidance range to $7.70 – $8.00.”

Moret continued, “We are ramping up investments to accelerate profitable growth and increase long-term differentiation. These include software development and commercial resources to fuel the growth of our Information Solutions and Connected Services offerings, accelerated investments to expand our Process capabilities, and projects to enhance employee engagement globally. We remain committed to investments that enable us to help our customers meet their productivity objectives and drive profitable growth and superior returns for our shareowners.

“Consistent with our long track record of returning excess cash to shareowners, today we are announcing a ten percent dividend increase. This increase reflects our confidence in the Connected Enterprise strategy and our ability to deliver sustainable cash generation.

“The dedication of our employees, partners, and suppliers continues to make the difference at our customers and is the key to our success.”

Following is a discussion of fiscal 2018 second quarter results for both segments.

Architecture & Software

Architecture & Software quarterly sales were $768.4 million, an increase of 6.9 percent compared to $719.0 million in the same period last year. Organic sales increased 2.5 percent, and currency translation increased sales by 4.4 percentage points. Segment operating earnings were $218.2 million compared to $190.6 million in the same period last year. Segment operating margin increased to 28.4 percent from 26.5 percent a year ago.

Control Products & Solutions

Control Products & Solutions quarterly sales were $882.8 million, an increase of 5.7 percent compared to $835.3 million in the same period last year. Organic sales increased 4.4 percent, currency translation increased sales by 3.6 percentage points, and the prior year divestiture reduced sales by 2.3 percentage points. Segment operating earnings were $126.9 million compared to $105.4 million in the same period last year. Segment operating margin increased to 14.4 percent from 12.6 percent a year ago.

Other Information

In the second quarter of fiscal 2018, cash flow provided by operating activities was $381.4 million and free cash flow was $359.3 million. Return on invested capital was 43.6 percent.

Fiscal 2018 second quarter general corporate-net expense was $17.8 million compared to $21.4 million in the second quarter of fiscal 2017.

On a GAAP basis, the effective tax rate in the second quarter of fiscal 2018 was 24.1 percent compared to 17.7 percent in the second quarter of fiscal 2017. The higher effective tax rate was due to lower favorable discrete tax items in the current quarter compared to the prior year and an additional provisional charge related to the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), partially offset by the lower tax rate under the Tax Act. The Adjusted Effective Tax Rate for the second quarter of fiscal 2018 was 20.5 percent compared to 19.2 percent a year ago. The increase in the Adjusted Effective Tax Rate was primarily due to lower favorable discrete tax items in the current quarter compared to the prior year, partially offset by the lower tax rate under the Tax Act. For fiscal 2018, the Company now expects an effective tax rate of approximately 60.5 percent and an Adjusted Effective Tax Rate of approximately 20.5 percent.

During the second quarter of fiscal 2018, the Company repurchased 2.5 million shares of its common stock at a cost of $465.0 million. At March 31, 2018, $934.8 million remained available under the January 15, 2018 share repurchase authorization.

Today the Board of Directors declared a quarterly dividend of 92 cents per share on the Company’s common stock, payable on June 11, 2018 to shareowners of record at the close of business on May 14, 2018.

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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