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On Thursday, Morgan Stanley (NYSE:MS) analyst Chris Snyder updated the firm’s outlook on Rockwell Automation (NYSE:ROK) by increasing the price target from $345.00 to $350.00. The analyst reaffirmed an Overweight rating on the company’s shares, indicating a positive view of the stock’s future performance. According to InvestingPro data, the stock is currently trading at elevated multiples with a P/E ratio of 31.7 and an EV/EBITDA of 22.7, suggesting it may be trading above its Fair Value.
Rockwell Automation’s second fiscal quarter results surpassed expectations, particularly in terms of profit margins. Snyder highlighted Rockwell’s impressive recovery over the last twelve months, which has significantly improved investor sentiment and positioned the company to benefit from increased operational efficiency during what is expected to be a robust period of US reshoring—an initiative to bring manufacturing back to the United States. InvestingPro analysis shows the company maintains a strong gross profit margin of 39% and has achieved a significant 13.6% return over the past week. The platform’s Financial Health Score indicates GOOD overall company health.
According to the analyst, Rockwell Automation has successfully cut approximately $340 million in annualized costs over the last twelve months, which has enabled the company to expand its margins by roughly 140 basis points in the second fiscal quarter. This was achieved despite a high single-digit organic revenue decline. The cost reductions and margin improvements suggest potential for further financial gains in the second half of the fiscal year. InvestingPro data reveals the company operates with a moderate debt level and has maintained dividend payments for an impressive 55 consecutive years, with 15 years of consecutive dividend increases.
Snyder also pointed out Rockwell Automation’s strategic advantage due to improved execution and competitive positioning in light of potential tariffs under a policy referred to as "Trump 2.0." The analyst expressed increased confidence in Rockwell’s ability to seize what is considered a once-in-a-generation opportunity to stimulate growth in US manufacturing capital expenditures, which have been in decline for decades.
Despite the company’s progress and the promising outlook, Snyder noted that Rockwell Automation’s stock is still trading at a discount when compared to previous order upcycles. This observation suggests that there is room for the stock’s valuation to grow. The maintenance of the Overweight rating reflects Morgan Stanley’s belief that Rockwell Automation’s shares are expected to outperform the market or its sector in the near future.
In other recent news, Rockwell Automation reported stronger-than-expected earnings for the second quarter of 2025, with adjusted earnings per share (EPS) of $2.45, surpassing the forecast of $2.09. The company also reported actual revenue of $2 billion, exceeding the anticipated $1.96 billion. Following the earnings announcement, KeyBanc Capital Markets updated their outlook on Rockwell Automation shares, raising the price target to $330 from $275 and maintaining an Overweight rating. Meanwhile, JPMorgan upgraded Rockwell Automation’s stock rating from Underweight to Neutral and increased the price target to $271 from $201, acknowledging improvements in the company’s margins due to cost reduction initiatives.
Rockwell Automation has projected normalized incremental margins around 35% by 2026, and analysts suggest that the company could achieve above-average incremental margins if the economic cycle turns favorably. The company’s full-year adjusted EPS guidance has been raised to $9.7 at the midpoint, with organic sales growth expected between +2% and -4%. Despite a 6% year-over-year decline in reported sales, the company achieved a segment operating margin of 20.4%, up from 19% the previous year. Analysts predict that should demand rebound more quickly than anticipated, Rockwell Automation’s earnings could potentially reach approximately $13.40 in fiscal year 2026.
The company continues to focus on innovation and cost management, contributing to its robust financial results. Rockwell Automation’s proactive measures appear to have laid a foundation for potential growth as market conditions evolve, with a particular focus on North America. The company is expected to benefit in the long term from reshoring and nearshoring trends.
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