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Rockwell Automation (ROK) Q4 Earnings: What's in Store?

Rockwell Automation Inc. ROK is set to report fourth-quarter and fiscal 2017 results on Nov 8, before the market opens.

Last quarter, the company delivered a positive earnings surprise of 6.67%. It is worth noting that Rockwell Automation has outperformed the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive earnings surprise of 10.02%.

We believe continued focus on Connected Enterprise (CE) integrated supply chain management system, and growth in transportation and consumer verticals and heavy industries have lifted investors’ sentiments for Rockwell Automation. Year to date, the company’s shares have yielded a return of 47.6%, outperforming 42.9% growth recorded by the industry it belongs to.

Let’s take a look at how things are shaping up prior to this announcement.

Earnings Whispers

Our proven model shows that Rockwell Automation is likely to beat estimates in the fiscal fourth quarter. This is because the company has the combination of two key ingredients for a possible earnings beat — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold).

Zacks ESP: Rockwell Automation has an Earnings ESP of +1.94% as the Most Accurate estimate of $1.75 is pegged higher than the Zacks Consensus Estimate of $1.72. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company’s favorable Zacks Rank #2 increases the predictive power of ESP. Moreover, its positive ESP makes us reasonably confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Rockwell Automation expects adjusted earnings per share in the range of $6.60-$6.80 for fiscal 2017. The mid-point of the guidance range reflects year-over-year growth of 13%. The company forecasts reported sales growth and organic sales growth to be in the range of 7-6%, respectively. The company anticipates continued growth in transportation and consumer verticals for the current fiscal. It also projects heavy industries to be up in low-single digits.

Further, Rockwell Automation is increasing the number of industries, applications and geographies, as well as improving its investments to expand the value of CE. The company has made inroads with its pilot program, working with customers in a wide range of applications, including remote-asset monitoring and predictive analytics. These initiatives will drive double-digit growth in fiscal 2017.

Notably, Rockwell Automation’s Control Products & Solutions segment, which generates around 54% of the company’s revenues, is anticipated to benefit from strategic acquisitions. Our consensus estimates reflect that net sales of the segment will reach $904 million in the fiscal fourth quarter, indicating 7.4% year-over-year growth.

Again, the Architecture & Software division, which generates around 46% of the company’s revenues, will benefit from focus on core developments in its Logix and intelligent motor-control platform. The Zacks Consensus Estimate for this segment’s sales is pegged at $750 million for the quarter to be reported, reflecting 7.8% year-over-year growth.

Stocks Worth a Look

Here are some stocks that you may also want to consider as our model shows these have the right combination of elements to deliver a positive earnings surprise:

NVIDIA Corp. NVDA has an Earnings ESP of +1.60% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Texas Instruments Inc. TXN has an Earnings ESP of +0.42% and a Zacks Rank of 1.

Adobe Systems Inc. ADBE has an Earnings ESP of +0.25% and a Zacks Rank of 1.

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