MILWAUKEE — Rockwell Automation, Inc. today reported third quarter fiscal 2024 results.
“Rockwell delivered another quarter of good execution with sales, margin, and EPS all above our expectations. I’m particularly pleased with the progress we are making on driving productivity to support our long-term margin expansion targets. We are already seeing the benefit from these actions this fiscal year and expect to drive margin growth and productivity through FY25 and beyond. On the demand side, we did see additional project delays this quarter, with customers citing weaker consumer demand, high interest rates, and policy uncertainty around tax, tariffs, and stimulus incentives as the main drivers for deferring their investment plans. Therefore, while we saw progress on inventory de-stocking at our distributors and machine builders in Q3, our low-single-digit sequential growth in orders was lower than we expected,” said Blake Moret, Chairman and CEO.
Fiscal Q3 2024 Financial Results
Fiscal 2024 third quarter sales were $2,051 million, down 8.4% from $2,239 million in the third quarter of fiscal 2023. Organic sales decreased 8.4%, currency translation decreased sales by 0.6%, and acquisitions increased sales by 0.6%.
Fiscal 2024 third quarter Net income attributable to Rockwell Automation was $232 million or $2.02 per share, compared to $400 million or $3.45 per share in the third quarter of fiscal 2023. The decreases in Net income attributable to Rockwell Automation and diluted EPS were primarily due to lower sales volume and lower pre-tax margin. Fiscal 2024 third quarter adjusted EPS was $2.71, down 10.0% compared to $3.01 in the third quarter of fiscal 2023 primarily due to lower sales volume and lower segment operating margin.
Pre-tax margin was 12.4% in the third quarter of fiscal 2024 compared to 21.1% in the same period last year. The decrease in pre-tax margin was primarily due to lower sales volume, prior year PTC investment gain, and restructuring charges, partially offset by lower incentive compensation.
Total segment operating earnings were $427 million in the third quarter of fiscal 2024, down 9.8% from $473 million in the same period of fiscal 2023. Total segment operating margin was 20.8% compared to 21.1% a year ago. The decrease in segment operating margin was primarily due to lower sales volume and unfavorable mix, partially offset by positive price/cost, lower incentive compensation, and the benefits from cost reduction actions.
Cash flow generated by operating activities in the third quarter of fiscal 2024 was $279 million, compared to $282 million in the third quarter of fiscal 2023. Free cash flow in the third quarter of fiscal 2024 was $238 million, compared to $240 million in the same period last year. Decreases in cash flow provided by operating activities and free cash flow were primarily due to lower pre-tax income partially offset by decreases in working capital.
Fiscal Year 2024 Outlook
The table below provides updated guidance for sales growth and earnings per share for fiscal 2024.
“We expect continued sequential order growth in the fourth quarter and into our next fiscal year, but at a more gradual pace than we originally expected. We are reducing our fiscal 2024 guidance to reflect this pace. Margins will continue to show the positive impact of productivity actions and pricing. We believe Rockwell is an outsized beneficiary of new capacity investments in our home market of North America, and while manufacturers are taking a pause in adding capacity, Rockwell and our customers continue to invest in resilience, agility, and sustainability. Rockwell’s technology portfolio, domain expertise, and ecosystem are uniquely positioned to help customers in these areas,” Moret continued.
Following is a discussion of third quarter results for our business segments.
Intelligent Devices
Intelligent Devices third quarter fiscal 2024 sales were $957 million, a decrease of 1.1% compared to $968 million in the same period last year. Organic sales decreased 1.2%, currency translation decreased sales by 0.6%, and acquisitions increased sales by 0.7%. Segment operating earnings were $194 million compared to $163 million in the same period last year. Segment operating margin increased to 20.2% from 16.8% a year ago. The increase from prior year was driven by positive price/cost, lower incentive compensation, and the benefits from cost reduction actions, partially offset by lower sales volume.
Software & Control
Software & Control third quarter fiscal 2024 sales were $512 million, a decrease of 31.8% compared to $751 million in the same period last year. Organic sales decreased 31.3% and currency translation decreased sales by 0.5%. Segment operating earnings were $121 million compared to $262 million in the same period last year. Segment operating margin decreased to 23.6% from 34.8% a year ago, driven by lower sales volume partially offset by positive price/cost, lower incentive compensation, and the benefits from cost reduction actions.
Lifecycle Services
Lifecycle Services third quarter fiscal 2024 sales were $581 million, an increase of 11.8% compared to $520 million in the same period last year. Organic sales increased 11.3%, acquisitions increased sales by 1.3% and currency translation decreased sales by 0.8%. Segment operating earnings were $112 million compared to $48.4 million in the same period last year. Segment operating margin was 19.3% compared to 9.3% a year ago driven by lower incentive compensation, higher sales volume, strong project execution, and ongoing savings from the prior year structural actions.
Supplemental Information
ARR – Total ARR grew 17% and Organic ARR grew 14% compared to the end of the third quarter of fiscal 2023.
Corporate and other – Fiscal 2024 third quarter Corporate and other expense was $28.6 million compared to $32.3 million in the third quarter of fiscal 2023.
Purchase accounting depreciation and amortization – Fiscal 2024 third quarter Purchase accounting depreciation and amortization expense was $35.6 million, up $8.4 million from the third quarter of fiscal 2023 primarily related to the acquisitions of Clearpath Robotics and Verve Industrial Protection.
Restructuring charges – Fiscal 2024 third quarter restructuring charges were $69.8 million, which relate to actions in conjunction with an enterprise-wide comprehensive program to optimize cost structure and expand margins. The charges are primarily related to severance benefits.
Tax – On a GAAP basis, the effective tax rate in the third quarter of fiscal 2024 was 9.4% compared to 15.5% in the third quarter of fiscal 2023. The adjusted effective tax rate for the third quarter of fiscal 2024 was 13.3% compared to 14.1% in the prior year. These decreases were primarily due to higher discrete benefits recognized in the current year.
Share repurchases – During the third quarter of fiscal 2024, the Company repurchased approximately 0.6 million shares of its common stock at a cost of $161.2 million. At June 30, 2024, approximately $0.5 billion remained available under our existing share repurchase authorization.
Return on Invested Capital (ROIC) – ROIC was 16.0% for the twelve months ended June 30, 2024, compared to 20.9% for the twelve months ended June 30, 2023. The decrease is primarily driven by a lower pre-tax net income.
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