A Member of Pat McKeough’s Inner Circle recently asked for his advice on an industrial automation company (Rockwell Automation) active in the factory devices, software & control and lifecycle services industries.
Pat likes the company’s positioning in the electric vehicle (EV) market. The firm should also benefit from re-shoring as manufacturing returns to North America from overseas.
Rockwell Automation Inc. (Symbol ROK on New York; www.rockwellautomation.com), provides industrial automation hardware and software products.
The company’s Intelligent Devices segment accounts for 45% of sales, with its Software and Control business generating 32%, and its Lifecycle Services business contributing the remaining 23%. All together, it has 29,000 employees, with 68% of them outside North America.
In November 2022, Rockwell announced that Ford Motor Company (symbol F on New York) had selected it as its vehicle operations primary controls and solutions provider for its next three electric vehicle (EV) assembly plants.
The deal bolsters Rockwell’s position within the EV market. Its products and services are being used at Ford’s automotive production complexes in Ontario, Ohio, and in Tennessee.
In October 2023, Rockwell completed the purchase of Waterloo-based Clearpath Robotics, including its industrial division, OTTO Motors. Clearpath, founded in 2009 by four graduates of the University of Waterloo’s mechatronics engineering program, aims to create robots that can do away with “the world’s dullest, dirtiest, and deadliest jobs.”
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Clearpath’s products include fixed robotic arms, automation software, and programmable logic controllers. Clearpath’s OTTO Motors division sells warehouse-focused autonomous mobile robots (AMRs). That’s a rapidly growing market. The purchase price has not yet been disclosed—but it’s reportedly around $600 million U.S.
In November 2023, Rockwell completed the acquisition of Verve Industrial Protection, a provider of asset inventory systems and vulnerability management solutions. This acquisition expands Rockwell’s cybersecurity offerings. The purchase price has not yet been disclosed.
Rockwell’s revenue rose 35.3% between fiscal 2019 (years end September 30) and fiscal 2023, from $6.69 billion to $9.06 billion. Over the same period, per-share earnings rose 39.8%, from $8.67 to $12.12.
Inner Circle: Key trends should deliver further growth for Rockwell Automation despite soft quarter
In the quarter ended June 30, 2024, Rockwell’s organic revenue dropped 8.4%, to $2.05 billion from $2.24 billion a year earlier. Revenue fell due to lower sales volumes. Excluding one-time items, the company earned $2.71 in the latest quarter. That was down 10.0% from $3.01, primarily due to the lower sales and higher costs.
All in all, the Clearpath purchase should be a particularly important one for Rockwell.
Transporting parts and materials to assembly lines and between manufacturing sites is one of the industry’s most complex and inefficient tasks, often resulting in production bottlenecks. Autonomous production logistics aims to transform the workflow throughout a manufacturing plant, enabling substantial reductions in cost and greater operational efficiency.
Clearpath’s OTTO Motors division offers autonomous mobile robots and fleet management and navigation software. That can significantly increase throughput and reduce costs by ensuring components and sub-assemblies are in place when needed and by transporting finished goods to a truck or warehouse upon completion.
Going forward, Rockwell is benefiting from several key trends, including new computer chip advances, electric vehicles, and EV battery manufacturing coming to the U.S. due to subsidies contained in the Inflation Reduction Act. Rockwell’s automation hardware and software also help manufacturing businesses become more efficient in a time of rising costs.
Recommendation in Pat’s Inner Circle: Rockwell Automation Inc. is a buy.
