On Mar 16, 2015, we issued an updated research report on Rockwell Automation, Inc. ROK. The provider of industrial automation power, control and information solutions is expected to benefit from diversification of sales streams, quality improvement and building partner network.

Growth in automation and acquisitions will also improve the company’s performance. However, a stronger U.S. dollar and lower oil prices remain headwinds.

Notably, Rockwell Automation has maintained its long-term financial goal of 6%—8% revenue growth. The company also aims to deliver double-digit EPS growth, return on invested capital (ROIC) of more than 20% over the long term and cash flow of around 100% of adjusted income. These long-term goals will be supported by expansion of product portfolio, solutions and services as well as global presence.

Moreover, the company hopes to achieve growth rates in excess of the automation market by expanding its served market, strengthening competitive differentiation and serving a wider range of industries and applications. Rockwell Automation’s objectives also include growing market share by attracting new customers and capturing a larger share of existing customer spending, improving quality and customer experience as well as enhancing market access by building channel capacity and partner network.

Rockwell Automation will benefit from expansion in the emerging markets and opportunistic acquisitions. In Oct 2014, the company announced that it has purchased the assets of ESC Services, Inc., a global hazardous energy control provider of lockout-tagout services and solutions. The acquisition will enable Rockwell Automation to increase asset utilization and strengthen enterprise risk management, while adding safety to its growing portfolio of data-driven, cloud-enabled services.

However, Rockwell Automation narrowed its 2015 EPS guidance to the range of $6.50 to $6.80. The company now expects sales of about $6.6 billion in fiscal 2015. This includes a currency headwind of about 4.5 points and organic sales growth in the range of 2.5% to 5.5%.

For the full year, owing to the dollar’s continued appreciation against other currencies, Rockwell Automation expects currency headwinds to reduce sales by 4.5 points. The company has also slashed the high end of its organic growth guidance from 6.5% to 5.5%.

Although Rockwell Automation has not witnessed any negative impact from lower oil prices on its business in the first quarter, its capital expenditure might get affected by the same. However, the company expects its oil and gas customers to complete large projects already underway and proceed with those they consider strategic; there remains some near-term concern regarding customers’ capital spending plans for 2015. Most of Rockwell Automation’s oil & gas customers have not declared their capital spending plans for 2015, although it is expected that oil and gas producers will reduce capital spending for 2015.

Furthermore, estimates for Rockwell Automation have moved downward in the past 60 days. The Zacks Consensus Estimate for 2015 decreased 1.6% to $6.60 per share and for 2016 the same reduced 3% to $7.13 per share.

Rockwell Automation carries a Zacks Rank #3 (Hold).

Other Stocks That Warrant a Look

Some better-ranked stocks in the same industry include AO Smith Corp. AOS, Astec Industries, Inc. ASTE and Briggs & Stratton Corp. BGG. All these stocks carry a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
ROCKWELL AUTOMT (ROK): Free Stock Analysis Report
 
SMITH (AO) CORP (AOS): Free Stock Analysis Report
 
ASTEC INDS INC (ASTE): Free Stock Analysis Report
 
BRIGGS & STRATT (BGG): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research