Rockwell Automation, Inc.'s (NYSE: ROK - News) third quarter EPS of $1.03 declined 3.7% from the prior-year quarter, due to increased investment spending and slower than expected growth in the U.S. and Europe.
For the full year 2008, the management expects revenue growth of 9%-10% in FY08, led by continued strength in Asia-Pacific and Latin America as well as in resource-based end markets, flat to low, single-digit organic growth rates in the U.S. and mid-single-digit organic growth in EMEA [Europe, Middle East, Africa]. We recommend investors Hold shares of ROK in their portfolio.
The company has a strong embedded customer base. Hence, it is well positioned to capitalize on the continued strength in the industrial automation market, which is likely to continue witnessing high levels of capital spending.
Another positive factor is the growth in the Logix open hardware architecture platform. The company has also been generating strong free cash flow. In the first nine months of FY08, ROK repurchased around 4.3 million shares for $251.7 million. Further, the company spent around $60 million to repurchase 1.4 million shares in the beginning of the fourth quarter.
However, over the next few quarters, Rockwell's architecture & software business should face several headwinds. Life Sciences and Big Pharma are cutting back on spending in response to slower sales growth and patent expirations. The U.S automotive sector got hit with rapid gas price increases, which has forced the industry to shift away from large vehicles and trucks and close plants. This led to a halt in projects and in MRO replacement markets.
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