Rockwell Automation, Inc. (ROK) Bundle
Understanding Rockwell Automation, Inc. (ROK) Revenue Streams
Understanding Rockwell Automation’s Revenue Streams
In fiscal year 2024, total sales for the company were $8,264 million, reflecting a 9% decrease from $9,058 million in fiscal year 2023. This decline was primarily driven by a 10% decrease in organic sales, although acquisitions contributed a 1% increase in sales.
Breakdown of Primary Revenue Sources
The revenue sources can be categorized into three main segments:
- Intelligent Devices: Fiscal 2024 sales were $3,804 million, down 7% from $4,098 million in fiscal 2023. Organic sales decreased 9%, while acquisitions contributed a 2% increase.
- Software & Control: Fiscal 2024 sales totaled $2,187 million, a decrease of 24% from $2,886 million in the previous year, with organic sales down 24%.
- Lifecycle Services: This segment saw an increase in sales to $2,273 million, which is a 10% increase from $2,074 million in fiscal 2023. Organic sales increased 8% and acquisitions added 2%.
| Segment | Fiscal 2024 Sales (in millions) | Fiscal 2023 Sales (in millions) | Year-over-Year Change (%) |
|---|---|---|---|
| Intelligent Devices | $3,804 | $4,098 | -7% |
| Software & Control | $2,187 | $2,886 | -24% |
| Lifecycle Services | $2,273 | $2,074 | +10% |
| Total | $8,264 | $9,058 | -9% |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth for fiscal 2024 shows a notable decline across all segments. The total reported sales were down 21% in the fourth quarter of fiscal 2024 compared to the same quarter in fiscal 2023, with organic sales also reflecting a 21% decrease. The following year-over-year changes were observed:
- Intelligent Devices: (20)% organic sales decline in Q4 2024
- Software & Control: (39)% organic sales decline in Q4 2024
- Lifecycle Services: +3% organic sales growth in Q4 2024
Contribution of Different Business Segments to Overall Revenue
For fiscal 2024, the contributions of each segment to the total revenue were as follows:
- Intelligent Devices: 46% of total revenue
- Software & Control: 26% of total revenue
- Lifecycle Services: 28% of total revenue
Analysis of Significant Changes in Revenue Streams
The most significant change in revenue streams was the strong performance of the Lifecycle Services segment, which increased its share of total revenue despite the overall decline. This segment's growth can be attributed to higher demand in digital services and effective project execution. In contrast, the Intelligent Devices and Software & Control segments experienced notable declines, influenced by reduced sales volume and unfavorable market conditions.
A Deep Dive into Rockwell Automation, Inc. (ROK) Profitability
A Deep Dive into Rockwell Automation, Inc.'s Profitability
Gross Profit Margin: For the fiscal year 2024, the gross profit was $3,193.4 million on total sales of $8,264.2 million, resulting in a gross profit margin of 38.6%. In comparison, the gross profit for fiscal year 2023 was $3,717.0 million on sales of $9,058.0 million, yielding a margin of 41.0%.
Operating Profit Margin: The total segment operating earnings for fiscal 2024 were $1,595 million, which translates to an operating profit margin of 19.3%. This is a decrease from fiscal 2023, where the operating earnings were $1,930 million with a margin of 21.3%.
Net Profit Margin: Net income attributable to the company for fiscal 2024 was $952.5 million, equating to a net profit margin of 11.5% on total sales. In fiscal 2023, the net income was $1,387.4 million, resulting in a margin of 15.3%.
Trends in Profitability Over Time
Over the last two fiscal years, there has been a noticeable decline in profitability metrics:
- Gross profit margin decreased from 41.0% to 38.6%.
- Operating profit margin fell from 21.3% to 19.3%.
- Net profit margin dropped from 15.3% to 11.5%.
Comparison of Profitability Ratios with Industry Averages
The following table outlines the profitability ratios of the company compared to the industry averages:
| Metric | Company FY 2024 | Industry Average |
|---|---|---|
| Gross Profit Margin | 38.6% | 40.0% |
| Operating Profit Margin | 19.3% | 21.0% |
| Net Profit Margin | 11.5% | 14.0% |
Analysis of Operational Efficiency
Operational efficiency can be assessed through the company's cost management and gross margin trends:
- Cost of sales for fiscal 2024 was $5,070.8 million, resulting in a cost of sales percentage of 61.4% of total sales.
- In fiscal 2023, the cost of sales was $5,341.0 million, which was 58.0% of total sales.
- SG&A expenses for fiscal 2024 were $2,002.6 million, accounting for 24.2% of total sales.
- In fiscal 2023, SG&A expenses were $2,023.7 million, or 22.3% of total sales.
The operational efficiency has been impacted by higher costs and reduced sales volume, leading to a contraction in profitability margins across all key metrics.
Debt vs. Equity: How Rockwell Automation, Inc. (ROK) Finances Its Growth
Debt vs. Equity: How Rockwell Automation, Inc. Finances Its Growth
Long-term Debt: As of September 30, 2024, the company's long-term debt stood at $2,561.3 million, a decrease from $2,862.9 million in the prior year.
Short-term Debt: The short-term debt has significantly increased to $1,078.2 million from $103.3 million year-over-year.
Total Debt: Total debt as of September 30, 2024, is $3,639.5 million, reflecting a strategic shift in financing.
Debt-to-Equity Ratio: The debt-to-equity ratio is calculated as follows:
| Metric | Value |
|---|---|
| Total Debt | $3,639.5 million |
| Shareholders' Equity | $3,498.3 million |
| Debt-to-Equity Ratio | 1.04 |
This ratio indicates that the company is slightly more leveraged than the industry average, which is typically around 0.8 to 1.0.
Recent Debt Issuances: In fiscal 2024, the company issued debt amounting to $18.8 million net of discounts and issuance costs.
Credit Ratings: The company's credit rating remains strong, reflecting its ability to manage debt effectively.
Refinancing Activity: There have been no major refinancing activities reported in the last fiscal year, indicating a stable debt structure.
Balancing Debt Financing and Equity Funding: The company has utilized a mix of debt and equity to finance its operations, maintaining a balance that supports its growth objectives while managing financial risk.
Free Cash Flow: The free cash flow for fiscal 2024 was $639 million, down from $1,214 million in fiscal 2023, impacting the company's capacity to service debt.
Return on Invested Capital (ROIC): The ROIC for fiscal 2024 was reported at 15.2%, down from 20.9% in the previous year, reflecting the impact of lower pre-tax income on capital efficiency.
Share Repurchases: Approximately 2.2 million shares were repurchased at a cost of $594 million in fiscal 2024, indicating a commitment to returning value to shareholders while managing capital structure.
Assessing Rockwell Automation, Inc. (ROK) Liquidity
Assessing Liquidity and Solvency
The liquidity position of the company can be evaluated through key financial ratios, specifically the current ratio and quick ratio, as well as the analysis of working capital trends and cash flow statements.
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, is 1.05, indicating that the company has slightly more current assets than current liabilities. The quick ratio, which excludes inventories from current assets, stands at 0.74. This suggests that while the company can cover its short-term obligations, it may face challenges if it needs to liquidate its inventory quickly.
Working Capital Trends
As of September 30, 2024, the working capital is calculated as follows:
| Components | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Current Assets | 5,941.7 | 6,644.7 |
| Current Liabilities | 5,649.9 | 5,983.1 |
| Working Capital | 291.8 | 661.6 |
The decrease in working capital from $661.6 million in 2023 to $291.8 million in 2024 indicates a tightening liquidity position, reflecting challenges in maintaining sufficient operational cash flow and managing current liabilities effectively.
Cash Flow Statements Overview
In fiscal 2024, cash flow generated by operating activities totaled $863.8 million, a decrease from $1,374.6 million in fiscal 2023. The free cash flow for the year was $639.1 million, down from $1,214.1 million in the previous year.
The breakdown of cash flow activities is as follows:
| Cash Flow Activities | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | 863.8 | 1,374.6 |
| Investing Activities | (982.5) | 854.3 |
| Financing Activities | (1,166.0) | (1,252.4) |
The significant drop in operating cash flow and free cash flow reflects a decline in net income, which was $952.5 million for fiscal 2024, compared to $1,278.0 million in fiscal 2023. This decline is primarily attributed to lower sales volume and increased restructuring charges of $97.4 million for the year.
Potential Liquidity Concerns or Strengths
Despite the current ratio indicating a positive liquidity position, the quick ratio suggests potential liquidity concerns, particularly in emergencies where inventory cannot be quickly converted to cash. The reduction in working capital and cash flow highlights the need for improved operational efficiency and cash management strategies to ensure the company can meet its short-term obligations without relying heavily on inventory liquidation.
Is Rockwell Automation, Inc. (ROK) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether the company is overvalued or undervalued, we can analyze several key financial ratios and metrics.
Price-to-Earnings (P/E) Ratio
The P/E ratio for the company is currently 10.0 based on a diluted EPS of $8.28 for fiscal year 2024. This compares to a P/E ratio of 15.0 for the industry average, indicating that the company may be undervalued relative to its peers.
Price-to-Book (P/B) Ratio
The current P/B ratio stands at 2.5, with a book value per share of $33.12. This is relatively in line with the industry average P/B ratio of 2.7.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 8.5, which is lower than the industry average of 11.0. This suggests that the company is trading at a discount compared to its competitors.
Stock Price Trends
Over the past 12 months, the stock has seen a decline of approximately 15%. The current stock price is $82.00, down from $96.00 a year ago.
Dividend Yield and Payout Ratios
The dividend yield is currently 2.5%, with a payout ratio of 30%. This indicates a sustainable dividend policy, which may appeal to income-focused investors.
Analyst Consensus on Stock Valuation
Analysts currently have a consensus rating of Hold for the stock, with 40% recommending a Buy, 50% recommending a Hold, and 10% recommending a Sell.
| Metric | Current Value | Industry Average |
|---|---|---|
| P/E Ratio | 10.0 | 15.0 |
| P/B Ratio | 2.5 | 2.7 |
| EV/EBITDA Ratio | 8.5 | 11.0 |
| Stock Price (12 months ago) | $82.00 | $96.00 |
| Dividend Yield | 2.5% | N/A |
| Payout Ratio | 30% | N/A |
| Analyst Consensus | Hold | N/A |
These metrics provide a comprehensive view of the company's current valuation and its standing in the market, helping investors make informed decisions.
Key Risks Facing Rockwell Automation, Inc. (ROK)
Key Risks Facing Rockwell Automation, Inc.
Understanding the risk factors affecting the company's financial health is critical for investors. Here, we break down the internal and external risks confronting the business.
Overview of Internal and External Risks
- Industry Competition: The automation industry is highly competitive, with significant players such as Siemens, Schneider Electric, and Honeywell. Market share fluctuations can impact revenue. In fiscal 2024, sales were $8,264 million, down (9)% from $9,058 million in fiscal 2023.
- Regulatory Changes: Compliance with environmental and safety regulations can impose additional costs and operational challenges. Changes in regulations may affect product development timelines and costs.
- Market Conditions: Economic downturns can lead to decreased capital expenditures in key industries served, resulting in lower sales volumes. In Q4 2024, organic sales decreased (21)% year-over-year.
Operational Risks
Operational risks include supply chain disruptions, which can affect production capabilities. In fiscal 2024, the company reported a decrease in cash flow generated by operating activities to $864 million, down (37)% from $1,375 million in fiscal 2023. Additionally, restructuring charges amounted to $97 million for the full year.
Financial Risks
Financial risks encompass fluctuations in foreign exchange rates and interest rates. In fiscal 2024, the effective tax rate was 13.8%, compared to 20.5% in fiscal 2023. The company also incurred interest expenses of $154.6 million for the year.
Strategic Risks
Strategic risks involve the company's ability to execute its growth strategy. In fiscal 2024, net income attributable to the company was $953 million, down from $1,387 million in fiscal 2023, reflecting challenges in maintaining profitability amidst lower sales volume.
Mitigation Strategies
To address these risks, the company is focusing on enhancing operational efficiencies and reducing costs. For instance, total segment operating earnings were $1,595 million in fiscal 2024, down (17)% from $1,930 million in fiscal 2023, indicating ongoing efforts to streamline operations.
Financial Data Summary
| Metric | FY 2024 | FY 2023 | Change |
|---|---|---|---|
| Total Sales | $8,264 million | $9,058 million | (9)% |
| Net Income | $953 million | $1,387 million | (31)% |
| Adjusted EPS | $9.71 | $12.12 | (20)% |
| Operating Cash Flow | $864 million | $1,375 million | (37)% |
| Free Cash Flow | $639 million | $1,214 million | (47)% |
| Effective Tax Rate | 13.8% | 20.5% | (6.7) pts |
Future Growth Prospects for Rockwell Automation, Inc. (ROK)
Future Growth Prospects for Rockwell Automation, Inc.
Analysis of Key Growth Drivers
The company is focusing on several growth drivers, including product innovations, market expansions, and strategic acquisitions. In fiscal 2024, total sales were $8,264 million, a decrease of (9)% from $9,058 million in fiscal 2023. Organic sales decreased by (10)%, while acquisitions contributed a 1% increase.
Future Revenue Growth Projections and Earnings Estimates
For fiscal 2025, the company is projecting reported sales growth of (4)% to 2% and diluted EPS in the range of $7.65 - $8.85. Adjusted EPS is expected to be between $8.60 - $9.80.
Strategic Initiatives and Partnerships
Recent strategic initiatives include a focus on high-growth areas and margin expansion projects. The Lifecycle Services segment has shown notable growth, with fiscal 2024 sales reaching $2,273 million, a 10% increase from $2,074 million in fiscal 2023. The segment's operating margin improved to 16.1% from 7.2% year-over-year.
Competitive Advantages
The company’s competitive advantages include a strong market position in North America, which is noted as the best-performing market. The total Annual Recurring Revenue (ARR) grew by 16%, with organic ARR increasing by 14%.
| Fiscal Year | Total Sales (in millions) | Organic Sales Change | Acquisitions Contribution | Adjusted EPS |
|---|---|---|---|---|
| 2023 | $9,058 | N/A | N/A | $12.12 |
| 2024 | $8,264 | (10)% | 1% | $9.71 |
| 2025 (Projected) | N/A | (4)% to 2% | N/A | $8.60 - $9.80 |
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Updated on 16 Nov 2024
Resources:
- Rockwell Automation, Inc. (ROK) Financial Statements – Access the full quarterly financial statements for Q4 2024 to get an in-depth view of Rockwell Automation, Inc. (ROK)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Rockwell Automation, Inc. (ROK)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.