ROCKWELL AUTOMATION, INC ROK

Rockwell Automation closed fiscal year 2025 with strong Q4 results, reporting double-digit year-over-year growth in both sales and operating earnings. Organic sales increased 13%, driven by product businesses, and sequentially grew high single digits, surpassing expectations. The company achieved over $325 million in structural productivity savings for the year, exceeding its original target of $250 million, contributing to a 240 basis point increase in segment operating margin to 22.5%.

Following a strategic review, Rockwell and SLB decided to dissolve the Sensia joint venture. Rockwell will assume 100% ownership of the process automation business it initially contributed, while SLB will regain its parts. This dissolution is expected to result in a $250 million revenue reduction for Rockwell but virtually no impact on operating earnings, with an approximate 50 basis point margin benefit annually. A non-cash impairment charge of $110 million ($0.97 per share) was recorded in Q4 related to this decision.

Discrete industries saw sales up 20% year-over-year, with e-commerce and warehouse automation growing over 70% and automotive sales up low double digits. The data center business, though small, showed strong double-digit growth, securing projects for modular cooling panels and leveraging Logix and modular power distribution for AI data center demand. Hybrid industries experienced double-digit growth across food and beverage, home and personal care, and life sciences, with increased automation adoption in medical devices.

Logix unit volumes reached pre-COVID levels in the second half of FY25, with expectations to exceed these levels in FY26 due to market expansion and share gains. Rockwell has already begun rolling out new Logix products, including the higher-performance L9 processor and a new family of Process I/O, contributing to steady sequential growth. The company is also advancing software-defined automation, including Logix in software form, which will be showcased at Investor Day.

For fiscal 2026, Rockwell projects organic sales growth of 2% to 6% and adjusted EPS of $11.20 to $12.20. The company anticipates segment margin expansion of over 100 basis points to 21.5% and free cash flow conversion of 100%. Capital expenditures are planned at approximately 3% of sales, focusing on plant and digital infrastructure. The company targets $500 million in share repurchases for the year, maintaining a strong capital structure.

Rockwell introduced a new engineering and development expense line, reclassifying costs from cost of sales to operating expenses, increasing gross margin by 8 points with no P&L impact. The company also changed its accounting policy for legacy asbestos exposure to a full horizon accrual for defense costs, resulting in a one-time^📎 pretax charge of $136 million ($0.91 per share) in Q4. Adjusted income and EPS definitions were updated to exclude these non-operational charges.