Insights

Why Rockwell Automation Stock Dropped 15% at the Open Today

What happened
Shares of Rockwell Automation (NYSE: ROK), an industrial company with a specialization in automation, dropped sharply at the open of trading on May 3, losing as much as 15% of their value out of the gate. As of 11:02 a.m. ET today, shares were still down 13.66%. The decline is likely tied back to the company’s fiscal second-quarter 2022 earnings update, which hit Wall Street before trading began today.
So what
On the top line, Rockwell Automation reported sales of roughly $1.8 billion, up just 1.8% from the fiscal second quarter of 2021. Although the company highlighted that organic sales rose 1.3%, it also pointed out that acquisitions added 2.3% to reported sales growth. So, all in, the company’s quarter wasn’t exactly a great one for its core business, noting that currency was a 1.8% headwind in the quarter and more than offset organic growth. The industrial concern also missed analyst sales expectations by a few percentage points.
Image source: Getty Images.

On the bottom line, the company reported adjusted earnings per share of $1.66, down a huge 31% from the fiscal second quarter of 2021. The biggest drags came from higher input costs and increased capital investment spending. Although the company can control what it spends on the latter, the former is a big investor concern today. And with inflation running hot, input costs are unlikely to materially decline in the near future. Rockwell Automation missed analyst earnings projections of $2.27 per share by a wide margin. Investors don’t like it when companies miss Wall Street expectations on both the top and bottom lines, which helps explain the negative mood around the shares.
Now what
But it gets even worse. Rockwell Automation also reduced its full-year fiscal 2022 guidance. Sales are now expected to be up 11% to 15%, down from a previous range of 16% to 19%. Organic sales growth is currently targeted to fall between 10% and 14%, down from 14% to 17%. And adjusted earnings per share is projected to be between $9.20 and $9.80, down from $10.50 to $11.10. Given that backdrop, it is not at all surprising that investors took a glass-half-empty view of the situation.
Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. –

What happened

Shares of Rockwell Automation (NYSE: ROK), an industrial company with a specialization in automation, dropped sharply at the open of trading on May 3, losing as much as 15% of their value out of the gate. As of 11:02 a.m. ET today, shares were still down 13.66%. The decline is likely tied back to the company’s fiscal second-quarter 2022 earnings update, which hit Wall Street before trading began today.

So what

On the top line, Rockwell Automation reported sales of roughly $1.8 billion, up just 1.8% from the fiscal second quarter of 2021. Although the company highlighted that organic sales rose 1.3%, it also pointed out that acquisitions added 2.3% to reported sales growth. So, all in, the company’s quarter wasn’t exactly a great one for its core business, noting that currency was a 1.8% headwind in the quarter and more than offset organic growth. The industrial concern also missed analyst sales expectations by a few percentage points.

Image source: Getty Images.

On the bottom line, the company reported adjusted earnings per share of $1.66, down a huge 31% from the fiscal second quarter of 2021. The biggest drags came from higher input costs and increased capital investment spending. Although the company can control what it spends on the latter, the former is a big investor concern today. And with inflation running hot, input costs are unlikely to materially decline in the near future. Rockwell Automation missed analyst earnings projections of $2.27 per share by a wide margin. Investors don’t like it when companies miss Wall Street expectations on both the top and bottom lines, which helps explain the negative mood around the shares.

Now what

But it gets even worse. Rockwell Automation also reduced its full-year fiscal 2022 guidance. Sales are now expected to be up 11% to 15%, down from a previous range of 16% to 19%. Organic sales growth is currently targeted to fall between 10% and 14%, down from 14% to 17%. And adjusted earnings per share is projected to be between $9.20 and $9.80, down from $10.50 to $11.10. Given that backdrop, it is not at all surprising that investors took a glass-half-empty view of the situation.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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