MILWAUKEE - Rockwell Automation, Inc. (NYSE: NYSE:ROK) reported a decline in its second-quarter fiscal 2024 earnings and revenue, alongside a cut in full-year guidance, prompting a 5.6% fall in its shares.
The company's adjusted earnings per share (EPS) of $2.50 exceeded analysts' expectations of $2.15, but this was overshadowed by the reduction in its fiscal year 2024 guidance, which is now set at $10.00 to $11.00, below the consensus estimate of $11.92.
For the second quarter, Rockwell Automation's revenue came in at $2.13 billion, down 6.6% from the same period last year and slightly above the consensus estimate of $2.06 billion. Organic sales saw an 8.1% decline, which the company attributed to excess inventory at customer locations, particularly machine builders, leading to a slower-than-expected order ramp. Despite this, the company's total Annual Recurring Revenue (ARR) grew by 20%.
Chairman and CEO Blake Moret acknowledged the challenges faced but emphasized market share gains and sequential order improvements.
"Execution in the second quarter was solid, and we continue to see sequential order improvement. However, there is more excess inventory at our customers, particularly machine builders, than we originally expected," said Moret. He also highlighted the company's commitment to future growth and profitability despite the revised outlook.
The Intelligent Devices segment experienced a 4.9% decrease in sales, while the Software & Control segment saw a more significant drop of 23.1%. Conversely, the Lifecycle Services segment reported a 14.0% increase in sales.
In addition to the financial results, the company announced the upcoming retirement of Nicholas Gangestad, Senior Vice President and Chief Financial Officer. The search for his successor is underway, and Gangestad will remain in his role to ensure a smooth transition.
The stock's downward movement reflects investor response to the lowered guidance, despite the company's reported EPS beat for the quarter. The reduced forecast for fiscal 2024 has raised concerns about the company's near-term growth prospects amid a challenging inventory landscape.
Rockwell Automation's fiscal 2024 second-quarter net income attributable to the company was $266 million, or $2.31 per share, compared to $300 million, or $2.59 per share, in the same quarter of the previous year. The decline in net income and diluted EPS was mainly due to a lower pre-tax margin, which fell to 14.6% from 15.4% year over year, primarily due to lower sales volume.
The company's free cash flow also decreased, coming in at $68.6 million compared to $156 million in the second quarter of fiscal 2023, primarily due to lower pre-tax income and higher tax payments, despite decreases in working capital.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.