Rockwell Automation Inc. ROK is poised to benefit from optimizing its portfolio and price increase actions. Investments made by ROK across many end markets, coupled with higher automation and digital transformation, will support it. Recent acquisitions will also boost Rockwell Automation’s performance in the upcoming quarters. 

Let us delve deeper and analyze the factors that make this stock worth holding on to at present.

Rockwell Automation’s Focus on Portfolio Expansion

ROK is poised well to benefit from broadening its portfolio of hardware and software products, solutions, and services. It is also gaining traction from investments in the cloud. The company's most recent FactoryTalk Design Studio includes a copilot, which improves automation system design efficiency and is integrated into this cloud-native application — an industry first. 

Significant investments to globalize manufacturing, product development, building channel capability and partner networks will drive growth. The company is likely to witness above-market organic sales growth by expanding its served markets and improving offerings that will provide it with a competitive edge.

The company continues to drive process improvement, functional streamlining, material cost savings and manufacturing productivity in an effort to augment earnings growth.

ROK’s Strategic Actions & Acquisitions

Rockwell Automation plans to implement several actions, including restructuring, to adjust its cost structure in light of the expected decline in order levels. It achieved productivity savings of around $110 million in the second half of fiscal 2024. 

The company will continue to benefit from price increase actions to mitigate the impacts of inflationary pressures, which are likely to improve its margin. Also, the company is investing in capacity, technology and people to increase supply-chain resiliency and support growth.

The company remains focused on buyouts that will augment its information solutions, and high-value service offerings and capabilities while expanding its global presence or enhancing process expertise. Rockwell Automation’s Plex buyout boosted the company’s software revenue growth and strengthened its annual recurring revenue streams. This acquisition aids ROK’s strategy to grow Connected Enterprise, while supporting customers’ increasing preference to adopt cloud solutions in order to improve agility, resilience and sustainability in their operations. 

Rockwell Automation acquired Denmark-based CUBIC in 2022, which specializes in modular systems for the construction of electrical panels. CUBIC’s innovative motor control solutions strengthen ROK’s portfolio of leading intelligent motor-control technologies.

Rockwell Automation’s Positive Earnings Surprise History

ROK has an average trailing four-quarter earnings surprise of 6.4%.

Near-Term Concerns for ROK Stock

Rockwell Automation is experiencing higher logistics costs due to elevated energy costs and constrained air freight lanes. The company expects increased spending on talent and growth, unfavorable mix, and unfavorable currency to weigh on margins in fiscal 2025. 

ROK’s top line is bearing the brunt of supply-chain challenges and cost inflation. It anticipates supply-chain constraints to continue in fiscal 2025. The manufacturing supply chain continues to be stressed by the sharp rise in demand and the ongoing shortages of electronic components, along with other global events that have put additional pressures on manufacturing output and freight lanes.

Component shortages have unfavorably impacted the company’s shipments of hardware and software products, solutions, and services. It is facing difficulty procuring components and materials necessary for hardware and software products, primarily for automation and e-commerce.

Rockwell Automation’s Price Performance

In the past six months, ROK shares have gained 16% against the industry’s 31.5% decline.

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ROK’s Zacks Rank & Stocks to Consider

Rockwell Automation currently carries a Zacks Rank #3 (Hold). 

Some better-ranked stocks from the Computer and Technology space are Garmin Ltd. GRMN, Flex Ltd. FLEX and Greenland Technologies Holding Corporation GTEC. GRMN sports a Zacks Rank #1 (Strong Buy) at present, and FLEX and GTEC carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Garmin has an average trailing four-quarter earnings surprise of 28.5%. The Zacks Consensus Estimate for GRMN’s 2024 earnings is pegged at $7.01 per share. GRMN’s shares gained 35.4% in the last six months.

Flex has an average trailing four-quarter earnings surprise of 14.2%. The Zacks Consensus Estimate for FLEX’s fiscal 2025 earnings is pegged at $2.42 per share. Its shares gained 21.5% in the last six months.

Greenland Technologies has an average trailing four-quarter earnings surprise of 566.7%. The Zacks Consensus Estimate for GTEC’s 2024 earnings is pegged at 57 cents per share. Its shares gained 39.3% in the last six months.

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