Is Rockwell Automation a buy?

Its time to breakdown another not so popular name. Here is the breakdown on $ROK, otherwise known as Rockwell Automation.


Current Price: $250.26

52/Wk High: $267.48

52/Wk Low: $115.38


Market Cap: $29.1 Billion

Dividend: $1.07 / 1.73% Yield


Read below for the breakdown!


Rockwell Automation is a major machinery and equipment components name that provides industrial automation power, information solutions, and power solutions for major manufacturers across the world.


Due to COVID-19 Rockwell has been forced to adjust and management has handled the crisis well. Now that a vaccine is being rolled out and a recovery is in play, Rockwell could be presenting an opportunity.


While COVID-19 has challenged the company, management is progressing on the acquisitions front, announcing the acquisition of Fiix Inc., a cloud software company in November.


Taking a look at the numbers Rockwell Automation bounced back in Q4, after seeing a large Q3 dip in earnings.


Rockwell Automation beat Q4 expectations with an EPS of $1.87 versus the analyst’s EPS consensus estimate of $1.74. On the downside, several numbers continued to decline.


Taking a look at Q4 sales, total sales declined by 9.3% year over year to $1.570 billion. In comparison to the same time in 2019, sales at the time were $1.730 billion.


On the flip side, sales throughout Q4 were up 12.6% sequentially and organic sales were up 9.9% sequentially, so the numbers from a sales basis were not all bad.


Furthermore, net income totaled $262.7 million in Q4 and the total segment operating margin landed at 20.2% for the quarter. Finally, Q4 cash flow provided by operating activities was $325.8 million, a major decline when compared to the Q4 2019 level of $475.0 million.


Reflecting on the full-year net sales totaled $6.3298 billion, representing a decline of 5.5% year over year. Secondly, net income for the full year landed at $1.0234 billion, much better than the FY 2019 level of $695.8 million.


On a final earnings note FY 2020 total segment operating margin was 19.9%, down from the 2019 segment operating margin of 22.0%. Although management did note this was due to lower sales and the impacts of acquisitions.


As for guidance management expects sales to grow 6% to 9% throughout 2021 and for adjusted EPS to land within a range of $8.45 to $8.85, both of which are much better than 2020.


Management was upbeat about their 2021 expectations.


As markets recover and industrial companies invest in their resilience and agility, Rockwell is well-positioned to grow in fiscal 2021,” CEO Blake Moret said.


Shifting into the balance sheet, the numbers have room for improvement.


Total Debt: $1.999 billion


Total Liabilities: $6.237 billion


Total Assets: $7.265 billion


Cash & Short Term Inv: $705 million


While the numbers could see improvement, the valuation is suitable.


Price to Earnings: 28.24x


Price to Sales: 4.55x


Price to Book: 28.00x


Price to Cash Flow: 23.24x


Management at Rockwell Automation has continued to outperform.


Return on Equity: 142.81%


Return on Assets: 15.30%


Return on Invested Capital: 21.98%


Given the numbers, the analysts are mostly bullish with the mean price target sitting at $251.42/share, representing a 0.44% upside.


It is also important to note that the high price target is $295.00/share, representing a 17.85% gain, while the low price target is $194.00/share, representing a -22.50% downside.


The big money is also quite involved with 77.36% of Rockwell Automation being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.


As for the technicals, Rockwell Automation could be flashing opportunity. According to the six-month charts the MACD is running flat within a tight range around 0.81737.


The six-month charts are also indicating an RSI of 54.0715 and CCI of 153.838. On a final technical note, Rockwell is quite far off its highs.


In short, Rockwell is a solid long term investment with a solid dividend that will pay you to hold a consistent company with excellent management.


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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.