Rockwell Automation(ROK) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total orders grew by 37%, reflecting strong demand across the portfolio of core automation and digital transformation solutions [10] - Total revenue grew 2% year-over-year, with organic sales increasing a little over 1% [10][33] - Adjusted EPS in the quarter was $1.66, down 31% from the prior year [35] - Segment operating margin was 15.7%, approximately 300 basis points worse than expected [34] Business Line Data and Key Metrics Changes - Intelligent Devices organic sales declined 3% versus the prior year, a sharp reversal from 25% growth in the first quarter [12] - Lifecycle Services organic sales increased 11% versus the prior year, led by 24% growth at Sensia [13] - Software & Control organic sales grew less than 1%, reflecting component shortages [12][42] Market Data and Key Metrics Changes - North America organic sales declined by about 3% due to a higher mix of Intelligent Devices [22] - Latin America sales were up 13%, EMEA sales increased 6%, and Asia Pacific grew 9% [22] - In China, high single-digit growth was driven by strength in mass transit, life sciences, tire, and oil and gas [22] Company Strategy and Development Direction - The company aims to achieve double-digit revenue growth this fiscal year and reach $9 billion of profitable sales in the next couple of years [8] - Focus on improving semiconductor chip availability and overall resiliency through various actions [24][26] - Continued investment in digital transformation projects across various industries [20] Management's Comments on Operating Environment and Future Outlook - Management noted persistent supply chain constraints and associated cost inflation impacting sales and earnings [9] - Despite challenges, management expects gradual sequential improvement in supply chain conditions over the coming quarters [57] - The company anticipates strong revenue growth in the second half of fiscal 2022 due to high backlog and low cancellation rates [23] Other Important Information - The company has suspended business in Russia and Belarus, which accounted for less than half of 1% of total sales [28] - The Board authorized an additional $1 billion of share repurchases [32] Q&A Session Summary Question: How do you think your customers will respond if we hit a recession? - Management believes that certain multiyear investments, particularly in semiconductor and electric vehicles, will remain resilient despite economic conditions [69][72] Question: How did component availability progress throughout the quarter? - Management noted improvements in component availability as the quarter progressed, with March being the largest month for shipments [83] Question: Can you clarify the price/cost equation for the year? - Management explained that the 17% price increase is expected to yield $400 million in cost recovery, while input costs are projected to increase by $200 million for the year [92] Question: What is the outlook for Lifecycle Services and Process Solutions? - Management indicated strong activity in upstream and midstream oil and gas, with good funnel activity and new offerings being added [114] Question: Why does it take so long to get pricing through the channel? - Management explained that many customers are on annual agreements, causing delays in realizing price increases until agreements are renewed [124]