Q4 2024 Summary
Published Feb 7, 2025, 7:58 PM UTC- Continued investment in R&D and customer-facing resources, with R&D in Software & Control at double digits percentage of sales, positioning the company for future growth.
- Strong position in the Americas, the best-performing region, with the largest share, best channel, largest installed base, and deepest relationships, expecting more orders from mega projects in '25 than in '24.
- Tracking thousands of projects across both new verticals (e.g., semiconductor) and traditional ones (e.g., food and beverage, automotive, life sciences), each side representing hundreds of billions of dollars of CapEx, with the biggest amount of these projects still to come over the next few years, offering significant growth opportunities.
- Rockwell Automation is experiencing negative mid-single-digit Compound Annual Growth Rates (CAGR) for fiscal '24 and the guide for '25, falling short of their prior expectation of mid- to high single-digit organic sales growth, indicating challenges in reversing declining sales trends.
- Management's guidance of up to +2% sales growth for fiscal '25 relies on better-than-expected sequential improvement and earlier recovery in end markets, which may be challenging given current market conditions, suggesting potential risk in achieving growth targets.
- Despite having a strong market share in the Americas, increased competition from rivals aiming to expand their footprint in the U.S. could intensify, potentially impacting Rockwell's market position and growth prospects in its key region.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Sales Growth | FY 2025 | no prior guidance | -4% to +2% , midpoint ~-1%; ~1 pt from price | no prior guidance |
Segment Margin | FY 2025 | no prior guidance | Just under 19% | no prior guidance |
Adjusted EPS | FY 2025 | no prior guidance | $8.60 – $9.80, midpoint $9.20 | no prior guidance |
Free Cash Flow Conversion | FY 2025 | no prior guidance | 100% of adjusted income | no prior guidance |
Annual Recurring Revenue (ARR) | FY 2025 | no prior guidance | ~10% growth | no prior guidance |
Tax Rate | FY 2025 | no prior guidance | ~17% | no prior guidance |
Corporate & Other Expense | FY 2025 | no prior guidance | ~$130 million | no prior guidance |
Net Interest Expense | FY 2025 | no prior guidance | ~$145 million | no prior guidance |
Diluted Shares Outstanding | FY 2025 | no prior guidance | ~113.1 million | no prior guidance |
Share Repurchases | FY 2025 | no prior guidance | ~$300 million | no prior guidance |
Cost Savings | FY 2025 | no prior guidance | ~$250 million | no prior guidance |
Segment Margin (Q1) | Q1 FY 2025 | no prior guidance | Low to mid-teens | no prior guidance |
Sales (Q1) | Q1 FY 2025 | no prior guidance | Down high single digits sequentially | no prior guidance |
Orders (Q1) | Q1 FY 2025 | no prior guidance | Flat sequentially | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Adjusted EPS | FY 2024 | $9.60 | $8.32 derived from Basic EPS: 1.87+ 2.32+ 2.03+ 2.10= 8.32 | Missed |
Reported Sales YoY Decline | Q4 2024 | -8.5% | -20.6% (from $2,562.9In Q4 2023 to $2,035.5In Q4 2024) | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Increased orders from mega projects | Q3 2024: No specific mega-project updates, only general delays rather than cancellations. Q2 2024: Mega projects expected to contribute to sequential order growth; key wins in EV/battery, semiconductor, renewables, and warehouse automation. Q1 2024: Not specifically mentioned. | Sequential ramp in mega project wins throughout FY24; funnel remains robust with more orders expected in FY25. | More bullish on future mega project activity |
Facility expansions (Cubic, new India facility) | Q3 2024: No mention [n/a]. Q2 2024: Noted expansions in India and synergy from Cubic (renewables). Q1 2024: No mention [n/a]. | Investing in facility expansions (CapEx/OpEx) including a new India facility and Cubic footprint to support data center growth and Asian resilience. | New references in Q4, expanding presence |
Market share gains | Q3 2024: Emphasis on new product intro (FactoryTalk Optix) and differentiated solutions in life sciences and mining. Q2 2024: Confidence in 5–8% organic growth; share gains in Logix, motor control centers. Q1 2024: Gains attributed to unique portfolio and strong partner ecosystem. | Modest share gains due to differentiated support and new product releases; strongest performance in Americas. | Continued momentum with validation from market reports |
Significant revenue decline in Intelligent Devices | Q3 2024: Flat sequential outlook; modest drop in organic sales (-1% YoY). Q2 2024: ~7.5% YoY decline; offset partly by Clearpath acquisition. Q1 2024: -4.5% YoY, attributed to supply chain constraints. | 20% YoY decline in Q4, citing channel destocking and slower end-user demand; expecting another sequential dip in Q1 FY25. | Persisting weakness, largely tied to inventory overhang |
Adjusted EPS below $2 in early FY25 | Q3 2024: No mention [n/a]. Q2 2024: No mention [n/a]. Q1 2024: Adjusted EPS was $2.04, below targets, partly due to currency headwinds. | Significantly below $2 guidance for Q1 FY25 due to non-recurrence of earn-outs, compensation inflation, and volume pressures. | New bearish detail indicating near-term earnings pressure |
Delayed customer investments in key industries | Q3 2024: Broad project pushouts especially in automotive (EV) and semiconductor. Q2 2024: Delays in EV, semiconductor, food & beverage. Q1 2024: Slowdowns in automotive, semiconductor, warehouse automation, and F&B. | Delays in food & beverage, life sciences, automotive (EV), O&G, and some semiconductor due to policy uncertainty and weaker end-user demand. | Continued cautious sentiment across multiple verticals |
Structural cost-saving & productivity measures | Q3 2024: $250 million total benefits expected, primarily structural, offset by returning incentive comp. Q2 2024: ~$120 million tailwind into FY25; 3% RIF. Q1 2024: No specific $250M target, but referenced efficiency initiatives. | Targeting $250 million in FY25. Realized $110 million in 2H FY24 from headcount cuts (>12%) and procurement efficiencies. | Expanded focus with clear FY25 cost-out target |
Integration of recent acquisitions | Q3 2024: Working to reduce inefficiencies, Clearpath and Verve cited for synergy. Q2 2024: Integrating acquisitions for cost synergies; focus on Cubic and Clearpath. Q1 2024: Clearpath and Cubic performing well, delivering multimillion-dollar wins. | Emphasizing integration of built/bought assets to drive simplification for customers; acquisitions should add ~1 point of organic growth in FY25. | Consistent integration focus, aiming for synergy |
Slower-than-expected order growth across end markets | Q3 2024: Growth was only low single-digit sequential, not the mid-single-digit expected. Q2 2024: Slower ramp due to high inventory at machine builders. Q1 2024: Not explicitly framed as slower growth; focus was on channel overstock. | Orders down low single digits sequentially in Q4; weaker end-user demand slowed normalization. | Ongoing softness, sequential uptick has not materialized |
Elevated inventory levels & slower reduction | Q3 2024: Inventory reduction slower than expected, especially in China. Q2 2024: Larger-than-anticipated overstock at machine builders. Q1 2024: Longer normalization timeline but distributors aiming for equilibrium by Q2 2024. | Lingering channel excess in Q4, particularly at distributors and machine builders; pace of reduction tied to weak end-user demand. | Still a headwind, improving more slowly than planned |
Cost reduction measures, including headcount | Q3 2024: 6% headcount cut since Q2, aiming for $100M 2H FY24 + $250M in FY25. Q2 2024: 3% RIF, $100M in savings in 2H, structural actions. Q1 2024: No specific headcount reduction measures [n/a]. | Achieved $110M in savings in 2H FY24, surpassing targets; headcount down 12% since Q2 FY24. | Aggressive downsizing to align costs |
Long-term organic growth targets (5–8%) | Q3 2024: Not mentioned [n/a]. Q2 2024: Confidence in reaching 5–8% over the cycle with market share gains. Q1 2024: Not discussed [n/a]. | CEO reaffirms 5–8% long-term target despite near-term negative CAGR; cites innovation and structural investments. | Maintained optimism on mid-/long-term outlook |
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2025 Growth Guidance
Q: How can you achieve +2% growth in 2025 given the slow start?
A: Achieving a 2% growth in 2025 depends on better sequential improvements and earlier recovery in end markets that would turn Intelligent Devices and Software & Control products to positive shipments for the year. If growth picks up earlier and builds sequentially, we'll see the pickup. Products will be the swing factor, while Lifecycle Services, with its longer lead times and exposure to process markets, is less likely to change dramatically. -
Q1 Guidance and Margins
Q: Is Q1 EPS expected to be significantly below $2 due to headwinds?
A: Yes, Q1 EPS will be significantly below $2. We face headwinds from non-recurring earn-out adjustments, compensation inflation, and volume reduction, all contributing to real decrementals as we enter Q1. -
Demand Recovery Timing
Q: When will demand bottom and start to recover?
A: We expect a very gradual sequential growth in orders after Q1, based on insights from various industries. Recovery in end markets will influence the turnaround, especially for products. We're not anticipating a sharp snapback but expect gradual improvement. -
Impact of Destocking
Q: How does destocking affect orders and shipments?
A: Destocking has caused shipments to outpace incoming orders during 2024. While there's still some stock left in the channel, its movement depends on end user demand. The biggest impact is on product-centric verticals like automotive and food and beverage. -
Americas Market and Share Gains
Q: How is Rockwell performing in the Americas market?
A: The Americas was our best-performing region in '24 and is expected to continue in '25. We have the largest share, best channel, largest installed base, and deep relationships. We're seeing modest share gains and expect more orders from mega projects in '25 than in '24. -
Investment in R&D and Growth
Q: Are you confident in returning to mid-single-digit growth without heavier investment?
A: Yes, we've preserved spending in customer-facing resources and R&D for new product introductions. We're launching new products across our portfolio, and we continue to uphold our framework for top-line and margin expectations. We've made surgical cuts to align costs but are not compromising future growth acceleration. -
European Machine Builders
Q: What's happening with European machine builders?
A: We're seeing increased engagement from European machine builders, which is encouraging. Coming off a year with overstock conditions leading to declines, we expect Europe to perform well after the Americas in '25 as overstock conditions dissipate and normal order patterns return. -
Shift in CapEx and Positioning
Q: How is Rockwell positioned as CapEx shifts to new industries?
A: Our project funnel is split between industries where we have less penetration, like semiconductor, and those where we have strong share, like food and beverage, automotive, and life sciences. Both sides present substantial opportunities, each representing hundreds of billions of dollars in CapEx. We're still in the early stages of these projects being awarded, with the biggest amounts yet to come over the next few years. -
Non-R&D Investments
Q: Can you provide more color on non-R&D investments and OpEx versus CapEx?
A: Our investments include a mix of OpEx and CapEx. We're expanding facilities like Cubic to manage strong growth in the data center business, adding a new facility in India for resilience in Asia, and enhancing digital infrastructure within IT to boost productivity internally and with partners. -
Tariffs Impact
Q: How have tariffs affected customer behavior?
A: We didn't see significant changes in customer behavior due to tariffs. We showed agility in reflecting tariffs in our pricing to customers and didn't observe purchases being brought forward. Investment continues in the U.S. to complement labor with technology, which aligns with our strengths.