Rockwell Slides After Operating Profit Trails Estimates
By Natalie Doss - Apr 27, 2011
Rockwell Automation Inc. (ROK), the Milwaukee-based maker of factory-automation software, fell the most since February 2009 after quarterly operating profit trailed analysts’ estimates.
The company posted operating income of about $220 million in the three months through March, trailing the average estimate of $223 million from six analysts in a Bloomberg survey. Deutsche Bank AG had estimated operating income of $224 million, Nigel Coe, a New York-based analyst, said today in a note to clients.
The company’s “essentially unchanged guidance of $4.40 to $4.60, tightened by 10 cents at the low end, will likely be perceived as a major negative,” Coe said. “We don’t think that management is being that conservative since the company has earned $2.17 in the first half, meaning that we have yet to cover 50 percent of fiscal-year guidance at the low end.”
Rockwell dropped $8.56, or 8.8 percent, to $89.28 at 1:12 p.m. in New York Stock Exchange composite trading. The shares earlier fell as much as 12 percent, the largest intraday decline since February 2009.
Net income in the company’s fiscal second quarter climbed 21 percent to $166.4 million, or $1.14 a share, from $137 million, or 95 cents, a year earlier, Rockwell said today in a statement. Sales gained 26 percent to $1.46 billion.
Revenue growth “was very strong,” Chief Executive Officer Keith Nosbusch said in a telephone interview. “We saw strong growth in Latin America, strong growth in Europe, Middle East and Africa and strong growth” at original equipment manufacturers.
Asia Growth
Rockwell said Asia-Pacific sales advanced 22 percent, excluding currency effects. That was slower than 26 percent growth, on a comparable basis, in the previous quarter.
Asia is “a disappointment in the context of a bull case that relies on China growth as a driver,” C. Stephen Tusa, a New York-based analyst with JPMorgan & Co. said in a note to clients. He has a “neutral” rating on the stock.
The growth rates in Asia in the past two quarters, and in China in the second quarter, “are all growth rates above the market growth rate, the underlying growth rate, so I’m not sure what everyone else was expecting, but it certainly met our expectations,” Nosbusch said.
Rockwell shares climbed 36 percent this year before today, a climb that Julian Mitchell, a Credit Suisse analyst in New York, said was helped partly by strong earnings reports from the company’s peers.
