Rockwell Plunges Most Since Start of Pandemic on Supply Snags

(Bloomberg) -- Rockwell Automation Inc., a provider of control devices and software for industrial automation, fell the most in more than two years as it blamed supply-chain snags for crimping sales and profit.

Since January, “we've seen supplier push-outs and de-commits for electronic component shipments, the impact of unexpected Covid-related shutdowns in China, and Russia start a war in Ukraine,” Chief Executive Officer Blake Moret said on a conference call with analysts to discuss earnings.

With the challenges piling up, Rockwell Automation on Tuesday slashed its profit expectations. The company now forecasts adjusted earnings for the fiscal year ending in September of $9.20 to $9.80 a share, down from a prior outlook of as much as $11.10. It also lowered its sales guidance.

While investors were expecting a cut, “the reduction was greater than expected,” said John Walsh, an analyst with Credit Suisse, in a note to clients.

What Bloomberg Intelligence Says:
“Cost inflation and component shortages, primarily electronic chips, appear to have outpaced Rockwell Automation's expectations, resulting in an earnings miss and guidance downgrade. Visibility on supplies is low, evidenced by the poor performance of the hardware-dominant Intelligent Devices segment, which went from outsized sales growth in fiscal 1Q to a decline in 2Q.”
-- Mustafa Okur, BI industrials industry analyst
Click here to read the research.

The reduced forecast weighed on shares even as Rockwell Automation recorded a 37% jump in orders during its second quarter and record backlog of pending projects. There's “broad-based demand growth across industries, geographies and offerings,” Moret said. The competition between heightened demand and supply pressure has been called out recently by companies as varied as Apple Inc., General Electric Co. and Harley-Davidson Inc.

Rockwell Automation's shares tumbled as much as 16% in New York, the largest intraday drop since the early days of the pandemic in March 2020. Rockwell Automation had slumped 28% this year through May 2 while the S&P 500 Index declined 13%.