Rockwell Automation (ROK)

[Investorman]

$80 Target Price on Rockwell
Monday July 9, 8:57 am ET
By Zacks Equity Research

Enjoying a several-week upswing in share price is large-cap automator Rockwell Automation (NYSE: ROK - News). Zacks senior analyst Ken Nagy, CFA tells why he believes there is still upside for buyers of the stock right now:
quot;Rockwell Automation is the world\'s largest industrial automation company, providing power, control and information solutions to improve manufacturing productivity. March quarter top-line exceeded consensus estimates, while the bottom line met expectations. Forward guidance indicates that revenue is expected to increase 7-8% in fiscal 2007.

quot;The power systems division has been divested for $1.8 billion. This has the impact of raising margins. We believe that the market has not yet impounded the recent attractive growth and earnings rates, and is instead focusing on the automobile segment. Consequently, we are reiterating our Buy rating on the shares.

quot;We do think the current growth rate is sustainable, especially given the fact that the business is highly correlated to the U.S. manufacturing base. We believe that the market has yet to impound the recent attractive growth rate into the current share price, Consequently, we are setting our target price at $80.00, which corresponds to a 18.6x P/E [price-to-earnings multiple].quot;