Rockwell Automation Inc. (NYSE:ROK) Q1 2018 Earnings Conference Call - Final Transcript

Jan 24, 2018 • 08:30 am ET


Rockwell Automation Inc. (NYSE:ROK) Q1 2018 Earnings Conference Call - Final Transcript


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Patrick Goris

in the first quarter of last year.

A few additional items to cover not shown on the slide. Average diluted shares outstanding in the quarter were 130.1 million, up 0.4 million from last year. And we repurchased about 1.1 million shares in the quarter at a cost of $208.6 million. This is ahead of pace to get to the $500 million full year target we shared with you last quarter. More on that in a little bit. At December 31, we had $400 million remaining under our share repurchase authorization.

Slide 6 provides the sales and margin performance overview for the Architecture & Software segment. This segment had another good quarter with more than 7% sales growth. Organic sales were up 4.6% year-over-year and currency translation increased sales by 2.7%. For the quarter, segment margin remained pretty flat year-over-year at a very strong 30%. Operating leverage associated with the sales growth was offset by higher investment spending.

Moving on to Slide 7, control products and solutions. Reported sales were up 5.8% for this segment. Organic sales growth was 5.9%, currency translation contributed 2.3%, and divestiture reduced sales by 2.4%. Growth in our solutions and services businesses in this segment picked up nicely in the quarter and came in at over 6%. The products businesses in this segment were up more than 5% on an organic basis. Operating margin for this segment increased 200 basis points compared to Q1 last year, primarily due to higher sales. Very good margin performance for this segment. Book-to-bill performance for our solutions and services businesses in this segment was 1.20 in Q1 compared to 1.11 a year ago.

The next Slide 8, provides an overview of our sales performance by region. Blake covered most of this slide in his remarks, so I will just reiterate that, like last quarter, growth was broad-based across geographies. Also, we saw good growth in emerging markets, which were up just under 10% compared to last year.

This takes us to Slide 9, guidance. We continue to project sales of about $6.7 billion, with organic sales growth within a range of 3.5% to 6.5%. We updated our currency assumptions, and we now expect the tailwind from currency translations to be closer to 2%, rounding really. And the sale of the business in fiscal '17 will, of course, remain about a 1-point headwind. We continue to expect segment operating margin to be a bit below 21.5%.

We believe the full year adjusted effective tax rate will be about 21%, 3.5 points lower than our November guidance and mainly as a result of tax reform. Our current estimate is that for fiscal '19 and beyond, under the new law, our adjusted effective tax rate will be in the range of 19% to 21%.

We're now targeting about $1.2 billion in share repurchases for fiscal '18, up from $500 million per our November guidance. To support this increased share repurchase activity, our Board recently approved a new $1 billion share repurchase authorization. We