Rockwell Automation Beats Analysts’ Fiscal 1Q17 Net Income Estimates
Rockwell Automation (ROK) reported net income of ~$215 million for fiscal 1Q17 against analysts’ expectations of $174 million. The deviation from analysts’ expectations was primarily due to a combination of higher sales, improved margins, and lower tax rates.
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The adjusted effective tax rate in fiscal 1Q17 was 18.1 % compared to 22.8% in fiscal 1Q16. According to the company’s earnings call, the decrease in the effective tax rate was primarily due to an inclusion of benefits from discrete tax items. A relatively small portion of the discrete tax benefit was due to the adoption of a new accounting standard regarding the company’s equity-based compensation.
Rockwell Automation’s free cash flows
Free cash flows are derived by subtracting company’s capital expenditure from its operating cash flows. This excess cash can be used in reducing debt, paying dividends, and funding acquisitions. The company also uses free cash flows as a financial measure for its annual incentive compensation.
For fiscal 1Q17, Rockwell Automation’s (ROK) free cash flows came in at $271.4 million compared to $145.3 million during fiscal 1Q16. The YoY (year-over-year) increase is primarily due to higher operating cash flows due to accounting changes as well as higher sales from the company’s operations in fiscal 1Q17.
Share repurchases and dividends
According to company filings, Rockwell Automation (ROK) returned about $5.4 billion to its shareholders in the form of dividends and share repurchases between 2008 and 2016. Rockwell Automation purchased about 0.65 million shares of its common stock under its share repurchase program in fiscal 1Q17, totaling ~$81 million. At the end of fiscal 1Q17, Rockwell Automation had about $864 million remaining for share repurchases under its existing board authorization.
On January 25, 2017, Rockwell Automation had a dividend yield of ~2.0%, compared to Honeywell International’s (HON) ~2.3%, Emerson Electric’s (EMR) ~3.2%, and AMETEK’s (AME) 0.69% in the industrial (XLI) automation space.
Next, let’s look at Rockwell Automation’s financial position at the end of fiscal 1Q17.