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.
Follow this link to continue reading:
One Quarter Doesn't Break, Or Make, Rockwell Automation
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