Thursday, August 2, 2018

One Quarter Doesn't Break, Or Make, Rockwell Automation

Even though I understand the demands of the world in which they work, sell-side analysts still amuse me from time to time (and I used to be one). When Rockwell Automation's (ROK) fiscal second quarter came up light on growth, you could hear the wails of anguish and the rending of garments that the cycle was doomed to roll over and crush Rockwell's multiple with it. Now Rockwell posts a stronger than expected fiscal third quarter and it's all party hats and conga lines. As I said, sell-siders serve a client base (institutional investors) where "long-term" sometimes seems to mean two quarters, but it does help explain at least some of the volatility in the share price.

For my part, I'm still a little concerned about the cycle. Many industrial CEOs have gone on record saying they think there's another 12 months or more left in this expansion, but I do think the pace is likely to slow and historically that's been a hard environment for Rockwell's share price performance. I do still like this company, and I like its partnership with PTC (PTC) and growing focus on software and services within automation. But "automation" is not a growth panacea and I have some concerns about a high-multiple stock in a possibly slowing sector that could see multiple reversion to the mean.

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One Quarter Doesn't Break, Or Make, Rockwell Automation

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