• Q1 Orders Growth: 10% year-over-year increase.
• Q1 Reported Sales: Declined 8.5% year-over-year.
• Intelligent Devices Organic Sales: Down 12% year-over-year.
• Software and Control Organic Sales: Declined 12% year-over-year.
• Lifecycle Services Organic Sales: Up 5% year-over-year.
• Segment Margin: Over 17% in the quarter.
• Adjusted EPS: $1.83.
• Free Cash Flow: $293 million, with a 140% conversion rate.
• Annual Recurring Revenue Growth: 11% in the quarter.
• Return on Invested Capital: 14.5% for the first quarter.
• Fiscal 2025 Organic Sales Growth Outlook: Range from -4% to +2%.
• Fiscal 2025 Adjusted EPS Guidance: $8.60 to $9.80, with a midpoint of $9.20.
• Free Cash Flow Conversion Expectation for Fiscal 2025: 100%.

• Warning! GuruFocus has detected 6 Warning Signs with ROK.

Release Date: February 10, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Rockwell Automation Inc (NYSE:ROK) achieved a 10% year-over-year growth in Q1 orders, indicating strong demand across all regions and business segments.
• The company reported a segment margin of over 17% and an adjusted EPS of $1.83, both exceeding expectations due to effective cost management and margin expansion initiatives.
• Lifecycle Services segment saw a 5% year-over-year increase in organic sales, driven by strong orders in the solutions business and recurring services growth.
• Rockwell Automation Inc (NYSE:ROK) secured significant strategic wins, including a partnership with CONVERGIX Automation Solutions and a project with Morocco's dairy factory, enhancing its competitive position.
• The company is on track to deliver $250 million in productivity benefits for fiscal 2025, supported by cost reduction and margin expansion actions.

Negative Points

• Q1 reported sales declined by 8.5% year-over-year, impacted by negative currency translation and challenging year-over-year comparisons.
• Organic sales in the Intelligent Devices segment decreased by 12% compared to the prior year, reflecting ongoing challenges in the automotive and semiconductor industries.
• Software and Control organic sales also declined by 12% year-over-year, despite exceeding expectations.
• The company faces ongoing macroeconomic and policy uncertainties, which continue to weigh on customers' capital expenditure plans.
• Asia Pacific sales declined by 9%, with a significant year-over-year decline in China, and the region is expected to be the weakest for Rockwell Automation Inc (NYSE:ROK) in fiscal 2025.

Q & A Highlights

Q: Can you provide more context on the SKU rationalization and its impact on 2025? A: Christian Rothe, CFO: The SKU rationalization reflects a focus on low sales SKUs, with no significant impact expected within the year. It's part of a broader effort to streamline operations, and while 21,000 SKUs were rationalized, another 39,000 are under review. This process is ongoing and aims to reduce costs associated with maintaining a large catalog.

Q: Given the positive order trends and commentary, is there a positive bias to the 2025 guidance? A: Blake Moret, CEO: We had a good start to the year with better-than-expected orders, which supports our thesis of gradual sequential growth. While the guidance remains conservative, the early performance aligns with our expectations for continued growth throughout the year.

Q: Can you elaborate on the improvement in orders and market conditions in Q1? A: Blake Moret, CEO: The improvement reflects both better market conditions and our enhanced product offerings. Destocking is largely complete, except in China. Growth was broad-based, with notable strength in hybrid markets like food and beverage, and e-commerce. Our new product introductions are also contributing to this positive trend.

Q: How did the election impact orders and market sentiment? A: Blake Moret, CEO: There was some positive impact post-election, with a general optimism among customers. Companies are eager to proceed with efficiency and transformation projects, fearing loss of market share if they delay. This sentiment is reflected in the broad-based project activity we observed.

Q: What are the drivers of margin upside in the quarter, and how does mix factor into the guidance? A: Christian Rothe, CFO: The margin upside was driven by favorable mix, particularly in Software and Control, temporary cost measures, and better-than-expected cost reduction and margin expansion activities. These factors contributed equally to the outperformance in Q1.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.