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Bear of the Day: Rockwell Automation, Inc. (ROK)

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Rockwell Automation, Inc. ROK is an industrial automation power. Rockwell is currently caught up in the ongoing supply chain logjam that’s making its way through every corner of the economy.

Rockwell shares started falling at the start of 2022 along with most of the market. ROK then plummeted in early May following disappointing guidance.

ROK’s Setbacks

Rockwell is an industrial automation and digital transformation company that aims to create what it calls the “next generation of smart manufacturing.” ROK operates three core business units: Intelligent Devices, Software & Control, and Lifecycle Services.

Rockwell’s products and solutions serve an array of industries including, metal, power generation, infrastructure, semiconductors, and beyond. Rockwell boasts partnerships with companies like Microsoft to help boost IoT within manufacturing to drive the ongoing revolution in connected technology.

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Zacks Investment Research

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Despite its standing in a key growth industry, Rockwell’s revenue has fallen on a YoY basis three times in the past seven years. Most recently, ROK fell short of Zacks Q2 FY22 earnings estimates by 27%.

Worse, Rockwell provided Wall Street subdued guidance, citing all-to-familiar supply chain bottlenecks. Rockwell management pointed directly to “new pressures from COVID-19 related shutdowns in China and war in Ukraine that are difficult to quantify.”

Bottom Line

Rockwell is still projected to post 11% revenue growth this year and 9% higher in FY23. But investors appear worried about the possibility of its bottom-line coming under even more pressure. ROK’s FY22 and FY23 consensus EPS estimates have dropped by 11% and 7%, respectively over the last few months.

Rockwell’s downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) right now. And Wall Street is rather mixed on the stock at the moment when it comes to brokerage recommendations, with three “Strong Sells,” seven “Holds,” and four “Strong Buys.”

Rockwell could certainly mount a comeback if the market finds its bottom sometime soon, and it remains a strong business overall. But ROK shares have tumbled 45% in 2022 and it might be best to stay away from the industrial automation company for now with the macroeconomic picture dragging down Rockwell and countless others at the moment.

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