Rockwell Automation stock soared Wednesday after the company beat profit expectations and raised its outlook. While tariffs pose a risk, the company also expects to benefit from an increase in domestic manufacturing.
The Milwaukee, Wis.-based industrial automation company reported March-quarter adjusted earnings of $2.45 a share, down 2% from the year-ago period. Sales fell 6% year over year, to $2 billion. It was the sixth straight quarter of declining earnings and fifth consecutive drop in sales. Yet EPS beat the highest analyst estimate, and sales also were above expectations, according to FactSet.
Rockwell Automation raised its forecast for adjusted EPS to $9.20-$10.20 for the fiscal year ending in September, up from $8.60-$9.80 a share. The midpoint of the raised range is effectively flat with fiscal 2024 earnings.
Management now expects full-year sales in a range from a 4.5% decline to a 1.5% increase. That's up from the previous range of -5.5% to +0.5%. Rockwell did not update its organic-sales forecast, citing potential impacts from tariffs. But a reshoring trend should benefit the company.
"Structural productivity is helping us expand our margins and invest for the future, even against the backdrop of current uncertainty," CEO Blake Moret said in the earnings release. "Given our significant homefield advantage, Rockwell is uniquely positioned to deliver value from increased manufacturing and digital transformation investments in the U.S."
Rockwell Automation's Tariff Costs
While tariffs hurt Rockwell's automotive business, other areas are offsetting the weak spots. Sales in e-commerce and warehouse automation grew more than 45% year over year, according to a transcript of the conference call with analysts via FactSet.
Rockwell Automation estimates its tariff costs could be $125 million for the second half of fiscal 2025. It expects to offset those costs in full through price changes, and the company is relocating some production.
Overall, Rockwell should benefit assuming that tariffs succeed in driving more manufacturing to the U.S. But some customers are delaying projects amid cost certainty, the interest-rate outlook and lower commodity prices that are hitting energy customers, executives said.
Rockwell Stock Rallies
The stock surged 12% to near 285 in afternoon trading, gapping above its 50-day moving average and the 200-day moving average. Rockwell stock is now 8% away from a new high and the top of a cup base with a 308.69 buy point. The relative strength line is at its highest level since July, according to IBD MarketSurge.
Rockwell shares are up more than 30% from the low at 215 on April 9. The stock made an all-time high at 354.99 at the end of 2021. It has a Composite Rating of 48.
Rockwell Automation stock has a 21-day average true range (ATR) of 4.11%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks that tend to make large jumps or dives in daily action, the kind that can trigger sell rules and shake investors out of a stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
There are exceptions, but given current market conditions, IBD generally suggests investors keep most of their portfolio focused on stocks with ATRs at or below 6%.
