Rockwell Automation revises FY2024 outlook amid inventory challenges By Investing.com

Rockwell Automation (NYSE:) has reported a downward revision in its fiscal year 2024 guidance, citing higher inventory levels at machine builders as the primary reason. During the earnings call, the company’s Chairman and CEO, Blake Moret, outlined a series of cost-cutting measures aimed at saving $100 million in the latter half of the year.

Despite the setback, Rockwell Automation remains optimistic about returning to year-over-year order growth in the third quarter and is focused on margin expansion and organic growth. The company reported a 6.5% year-over-year decline in total sales, primarily due to an 8% drop in organic sales.

Still, adjusted earnings per share (EPS) and organic sales for the second quarter were above expectations.

Key Takeaways

• Rockwell Automation expects a 7% decline in organic sales at the midpoint for FY2024.
• The company anticipates year-over-year growth in orders to resume in Q3, with sequential order growth in Q3 and Q4.
• Cost-saving measures, including a workforce reduction of approximately 3%, are being implemented to align costs with the revised outlook.
• Rockwell Automation plans to maintain R&D spending at 6% of revenue and to continue investing in new product introduction.
• The company is confident in its long-term growth targets, driven by market share gains in areas such as Logix Controllers and motor control centers.

Company Outlook

• Rockwell Automation revised its fiscal year 2024 sales guidance, projecting a 7% decline in organic sales at the midpoint.
• The company expects mid-single-digit sequential order growth in Q3, followed by high-teens growth in Q4.
• A reduction in force will primarily affect sales, marketing, and headquarter functions.
• Rockwell Automation aims for a significant margin improvement in Q4, driven by volume, cost savings, and a more favorable revenue mix.

Bearish Highlights

• Total sales decreased by 6.5% year-over-year, with an organic sales decline of 8%.
• The Discrete and Hybrid Industry segments were most affected by high product inventory levels.
• Adjusted EPS is expected to decrease by 13% year-over-year at the midpoint.

Bullish Highlights

• The Americas region performed the strongest, with Latin America growing by 8%.
• Rockwell Automation is focusing on high-value activities and integrating recent acquisitions for cost synergies.
• The company is involved in semiconductor fabs, renewables, and warehouse automation,…