Shares in Rockwell Automation (ROK 2.29%) rose by 11.3% in the week to Friday morning. The move was catalyzed by its first-quarter 2025 earnings report, released Monday. It wasn't so much the earnings as it was management's success in cutting costs and, more importantly, its double-digit orders growth in the quarter. Investors usually follow orders growth at Rockwell because it indicates the industry's willingness to invest and signals the direction of its sales growth.
Rockwell Automation's first quarter
The company's sales declined by 8.4% in the quarter (down 7.6% on an organic basis). Significant profit margin declines usually accompany such sales reductions. Still, due to cost reduction efforts, the operating profit margin came in at 17.1% compared to 17.3% in the same quarter of last year. CEO Blake Moret declared in the earnings release, "Q1 margins and EPS came in well above our expectations this quarter, reflecting some early benefits of Rockwell's renewed focus on operational excellence and cost discipline."
NYSE: ROK
Key Data Points
Orders growth
Orders were up 10% on a year-over-year basis and mid single digits sequentially (management had expected them to be similar to the fourth quarter of 2024). Management also believes the destocking cycle (whereby distributors run down excessive inventory of Rockwell's products before ordering new ones) is "mostly behind" the company. In addition, Rockwell's book-to-bill ratio was above 1 for the first time in seven quarters, indicating growth is on its way.
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With Moret expecting sales growth to turn positive in the second half of the year, Rockwell is on the recovery track, and its peer Emerson Electric expects its discrete automation orders to turn positive in the current quarter with a larger ramp-up in the second half. That's a good sign for companies and the industrial sector.
