Rockwell Automation: High Expectations Ahead of Earnings Report

Rockwell Automation (ticker: ROK) is set to release its fiscal third-quarter numbers on Tuesday morning. Analysts forecast earnings per share of $3.18 on sales of $2.3 billion, reflecting a positive trend compared to last year's $2.66 per share on sales of $2 billion.

The easing of supply-chain pressures, including semiconductor shortages, has contributed to Rockwell's recent success. As a leader in industrial technology and information, Rockwell produces essential hardware and software for manufacturing facilities, much of which relies on microchips.

Furthermore, increased investments due to new legislation such as the Inflation Reduction Act and the CHIPS Act have provided additional support for Rockwell's business. These laws aim to foster domestic manufacturing, thereby potentially bolstering the company's sales and earnings growth in the years to come.

Nonresidential construction activity, a key indicator of new investment in the U.S., remains at a robust annualized rate of approximately $1 trillion, close to record levels.

This favorable outlook has propelled Rockwell's stock up by approximately 31% year to date, trading at around 25 times the estimated earnings for calendar year 2024. This valuation represents a premium compared to the S&P 500's multiple of 18 times.

While positive investor sentiment surrounding Rockwell is widespread, it is crucial for the company to deliver strong results to sustain stock momentum in the short term.

Back in April, management raised its financial forecasts for the full year when reporting fiscal-second-quarter numbers. Rockwell now expects fiscal 2023 earnings per share to range between $11.50 and $12.20, compared to the previous guidance of $10.70 to $11.50. Wall Street consensus currently projects fiscal 2023 earnings per share of approximately $12.03.

To address investors' inquiries, management will host a conference call at 8:30 a.m. Eastern time to discuss the earnings report, focusing on guidance for the current year and future prospects heading into 2024.