Rockwell Automation at Global Conference: Strategic Moves Amid Challenges

On Wednesday, 21 May 2025, Rockwell Automation (NYSE:ROK) participated in the 18th Annual Global Transportation & Industrials Conference. The company provided a strategic overview highlighting its leadership in industrial automation and its plans to address both opportunities and challenges. While emphasizing margin improvements and operational excellence, Rockwell also acknowledged macroeconomic headwinds and project delays.

Key Takeaways

• Rockwell Automation aims to expand gross margins through operational excellence and insourcing initiatives.
• The company is optimistic about growth in warehouse e-commerce, life sciences, and energy sectors.
• Executives highlighted the integration of new capabilities to simplify automation systems.
• Rockwell is managing macroeconomic uncertainties by controlling costs and optimizing supply chains.
• Tariff impacts have been reduced significantly, with no expected impact on earnings per share (EPS).

Financial Results

• Targeting an operating margin of 23.5%, with the current year guide at 20%.
• Achieved a 3% price realization in Q2, unrelated to tariffs.
• Tariff impacts reduced from $125 million to $70 million due to pauses.
• Warehouse e-commerce grew by 45% last quarter, contributing 5% of total revenue.

Operational Updates

• Focus on operational excellence to enhance gross margins and customer service.
• Integration of newly acquired capabilities aims to simplify automation systems.
• AI is being used to streamline the design and operation of automation systems.
• Rockwell’s operating model is designed to be self-sustaining through economic cycles.

Future Outlook

• Persistent demand for warehouse e-commerce expected to continue into 2026.
• Strategic focus on integrating acquisitions and expanding market share outside the U.S. and Europe.
• Exploring annual recurring revenue sources and application-specific technologies.

Q&A Highlights

• Project delays attributed to cost, demand, and funding issues, but not cancellations.
• Investments are focused on modernizing facilities.
• More insights into the long-term plan will be shared at the Investor Day in November.

In conclusion, Rockwell Automation remains confident in its strategic direction and ability to navigate challenges. For a detailed understanding, readers are encouraged to refer to the full transcript.

Full transcript - 18th Annual Global Transportation & Industrials Conference:

Nigel Coe, Analyst, Wolf Research: Great. Well, morning. And for those joining the webcast, welcome to the Wolf Day two of the Wolf Research Global Industrials and Transports Conference. My name is Nigel Coe. I cover multi industry stocks here at Wolf and I also cover Rockhold Nation.

And Rockwell is the next company on the agenda. Very pleased to welcome to the stage Chairman and CEO, Blake Morett and CFO, Christian Routhi. So gentlemen, thank you very much for the time. And Blake, maybe some opening remarks and we’ll get into

Blake Morett, Chairman and CEO, Rockwell Automation: Sure. Absolutely. Well, thank you for the interest this morning. Rockwell Automation is really the world’s largest pure play devoted to industrial automation and digital transformation. Headquartered in Milwaukee, Wisconsin, we serve manufacturing and production companies across discrete, hybrid and process segments.

And in The US, we’re the most used technology in American manufacturing. So that’s topical right now and a great home field advantage as we see more investment in The US. Beginning early last year, we really leaned into, expanding margins to complement, top line, and, I’m happy to see early results of that. Christian, fairly new in the role since August of last year, but has certainly, supercharged that effort. And, as we see the company returning to growth, in this quarter, our third fiscal quarter, I’m excited to see that coupled with the lower cost base and what that can do to expand margins to complement top line growth for what we think is going to be a more complete result.

Nigel Coe, Analyst, Wolf Research: Thanks Blake. That’s great. And we’re definitely going get into the margin improvement story because I think that’s a really important part of the equity story here. So Blake, just want to touch on one thing you said in your opening remarks. You brought out Rockwell as the largest automation player in North America.

Can you maybe just quantify that, just to put like to mark to market where we are in market share and how market share trends

Blake Morett, Chairman and CEO, Rockwell Automation: are trending? Sure. So we are worldwide the largest company devoted exclusively to industrial automation and digital transformation. We certainly compete with other companies that are bigger by revenue, but they do a lot of other thing, trains and, you know, valves and things like that. In The US, we we are the leading share company in industrial automation.

And for an example, it’s just one part of our product line. We think our market share in Programmable Controllers is around 70%, which is probably 10 times the size of our nearest competitors, most of which are coming in from Europe.

Nigel Coe, Analyst, Wolf Research: Okay. Last time I checked, I always had a number of between 5060% in my head. I know you talked about gaining share. I mean, what sort of verifiable data do you have to give you just confidence you are gaining share?

Blake Morett, Chairman and CEO, Rockwell Automation: Sure. So we look at share from really four different points, three that are quantitative and then one that’s a little more qualitative. From the quantitative side, the most direct information that we get is from the NEMA U. S. Market share reports, and we see those regularly.

And those include the various aspects of our product businesses as well as the motor control centers. And so that’s one point. The next is we look at the light parts of our competitors’ business when we release earnings and we look at the automation portion of Siemens Digital Industries, when we look at the relevant portions of Emerson and so on. And so that’s another point. And I’ll mention that we’ve grown favorably compared to our German competitor, the automation portion.

We’ve got quite a streak of multiple quarters of performing favorably there. So that’s another data point. And then we look at the product specific reports from people like Omnia, who are looking at programmable controllers or drives or what have you. And again, there’s a consistent message there. So those inform, when we talk about gaining, and we say modest share, these things don’t happen overnight.

The final piece is just anecdotally, when we’re in a big high profile head to head competition with one of our competitors, what are their messages, what are our messages, what are our win rates in those sorts of projects. So again, we take a look at that.

Nigel Coe, Analyst, Wolf Research: It’s pretty common. Okay. We’ll get off market share because I’m sure your German competitor is listening right now. So I don’t want get in trouble too much. Maybe before we get into your perspectives on the macro and maybe how this could sort of all evolve, What of what do you say right now, Blake, are the top two or three things on your mind in terms of strategic priorities and where you want to drive Rockwell in the next twelve to eight months?

Blake Morett, Chairman and CEO, Rockwell Automation: Well, our overarching focus is on integrating the parts. We’ve built and we bought a lot of new capabilities over the last, you know, particularly six or seven years, COVID and supply chain notwithstanding, we’ve been able to play a lot of offense, if you will. And, our traditional sources of value, the programmable controllers, the drives, the motion, domain expertise, remain vibrant, but adding the new capabilities, you know, 10% of our business now annual recurring revenue, The autonomous mobile robots, you know, very strong cybersecurity efforts, and offering. Integrating all these pieces together brings a lot of benefit in multiple ways. First of all, for customers, you get a simpler automation system.

When you have common look and feel, when you have open APIs exchanging data between different software applications, and when you can create a digital twin of your overall plant and simulate it virtually without having to run, you know, material through a line for months and months, you can do that virtually. Those, provide tremendous value to the customer. It’s kind of what they’re looking for, you know, from a, full scale production automation supplier. And so we’re putting a lot of effort into that. The acquisitions, the new capabilities we built organically, integrating those altogether for customers.

For investors, you should be interested because it’s a part of that margin expansion story. So we’ve not we’ve paused, you know, on, the same frequency of acquisitions because we know that acquisitions come with potentially dilutive integration costs. And while we’ll be back doing acquisitions in the future, this seemed like the right time as we got to a critical mass with respect to software and digital services, mobile robots to make sure that we do a really complete job of integrating those, but also get past those initial dilutive integration costs, without throwing new new things on the heap, if you will. And so I think that’s a part of the tailwind that’s, you know, affecting the margin story that, you know, I’m sure you’ll ask, Christian about a little bit as well. And then finally, and it’s an important point, our employees have been through a lot in the last few years, beginning with COVID, supply chain, the Overstock situation last year, and giving them a chance, you know, to, recenter, if you will.

Many of those employees are new and giving a chance for that culture to, you know, continue to strengthen with a lot of new people, that’s another reason for focusing on the integration of the pieces of our worldwide company.

Christian Routhi, CFO, Rockwell Automation: David, if you allow me to jump in a little bit. So strategic priority wise, we certainly have another one, which is operational excellence. And so, you know, the we we talked about this at at Investor Day last year, but importantly for Rockwell, we’ve got really strong expertise and and and really good track record around the commercial side of the organization. Right? We’re really good at commercialization and and our sales and marketing team is second to none.

We’ve got great channel partners. So the commercials commercialization side of the business is really strong. The r and d portion of the business, again, a really good background, great history, and and really good technologies in the market and in an ongoing development process that, again, we we feel really strongly about, which is reflected in the market share. We’re trying to add another leg to the stool, is really good operational excellence, which is partially a margin expansion story, but it’s also partially about trying to continue to enhance the ability for us to to serve our customers, which is gonna help us on the top line.

Nigel Coe, Analyst, Wolf Research: Maybe just carrying on with our thought process. So obviously, you’ve been Rockwell CFO now for eight months, maybe nine months or so. So when you came in and did your due diligence, visiting the various functions, why do you think Rockwell was maybe falling short on the operational tempo side?

Christian Routhi, CFO, Rockwell Automation: Yes. So again, you guys all look at a lot of industrial companies. And I think when you look at those industrial companies and you think about each one of them, in a lot of cases, you’re going to index on or at least focus on a few areas where you say, okay, these folks are really good at this. And so, you know, as I was doing my diligence, for sure, it it’s absolutely clear. And frankly, my experience as a Rockwell customer prior to this, it was very clear that Rockwell is outstanding as far as being really on point with the with the marketplace around what’s happening in industrial automation and continuing to to drive that from a a marketplace perspective.

Also really strong in the r and d side. And what Blake and I talked about even from day one and that was part of my diligence processes around, okay, how are we thinking about the ability to grow gross margins? How are we thinking about the ability to drive operational excellence inside of our own factories and and inside of our businesses? And that was an area that it it I think we all agree that there’s a really good opportunity. It’s certainly something something that I saw from afar as I’m getting into the to the business and getting to know the organization a lot better, getting to visit facilities.

I think there is a chance for us to to do more. And that has very little to do with any errors or missteps that were made historically. It was a strategic decision of the organization to be more asset light over the last twenty some years. And that’s an opportunity for us to then say, okay, what if we actually put more of our assets to work? Right?

Our balance sheet’s in great shape. We have the ability to to invest more in ourselves. How do we bring more of things that we’re we’re doing on the outside into our own operations? How do we think about bringing more of the Rockwell technology into our own operations, right, Rockwell for Rockwell? And so putting a little bit of our balance sheet to work in order to get a benefit on the P and L.

Nigel Coe, Analyst, Wolf Research: And oftentimes, as you sort of turn over stones, find more stuff and more things to do. So if you were to say, maybe over the last six months or so, how do you think the opportunity sets for that margin expansion has developed?

Christian Routhi, CFO, Rockwell Automation: I think there’s a fair bit of runway. That’s a good part. And when you think about it, at least the way I think about it, it’s great to have those opportunities and to know that those opportunities are some that you can execute today that can have a yield relatively early on. And you see some of that already in the the cost reduction and margin expansion activities that we’re doing right now. Some of that’s, you know, material purchases, working with our supply base.

Those are relatively fast. The next layer is thinking about, okay, how do we do some of that insourcing? How do we think about potentially taking things to be done on the outside, bring them inside, remove people from our profit pool? Those are great opportunities for us. It takes a little bit more time.

Then you go even farther out and you think, okay, well, what does that mean then? Once we start to really think about what the Rockwell manufacturing of the future could look like, is there more that we can do around footprint? Is there more that we can think about as far as how we go to market or how we serve the market? And and those are again, they’ll take a longer period of time. But the great news is is that we have all those opportunities and we can phase them and do it ratably while having a really good, again, that long runway for margin expansion.

Blake Morett, Chairman and CEO, Rockwell Automation: Yeah. And from last year’s business environment served as a strong catalyst for kicking office, say revitalized approach. Really importantly, we’re spending a lot of time making sure that we operationalize this in a Rockwell operating model so that this continues, you know, through the cycle and for many years in the future, and it’s not dependent on individual heroics or the urgency at the moment, but we’ve got these things in a broader effort that’s self sustaining as we continue to incent people to look for opportunities to be more efficient.

Nigel Coe, Analyst, Wolf Research: And then thinking about sort of chicken and egg, so Christian comes in with a strong operational background, starts to develop this operational framework. Or was it a case of you wanted somebody with that kind of experience to drive that margin?

Blake Morett, Chairman and CEO, Rockwell Automation: I think from the first time Christian and I spoke on a Saturday morning back early last year, he understood that it was we were looking for somebody who would take what we had already stated as targets in terms of expanding margins to complement the growth and to, you know, make sure that we put in a suitably broad and intense framework for making this happen. And I really liked when, know, at the end of a long conversation on that morning, you know, Christian said, you know, the next, you know, meeting I’d, you know, like to have is at a Rockwell plant. And so, you know, we snuck him into Twinsburg, he had a look around to understand what our baseline was. And that was, I thought, a very good start.

Nigel Coe, Analyst, Wolf Research: That’s great. Thank you. Thanks. Question here.

Blake Morett, Chairman and CEO, Rockwell Automation: Yes. Absolutely, it’s a great story. We have very strong AI capabilities. We certainly are looking at using artificial intelligence in our own operations, you know, as a next evolution of things like robotic process automation and so on in finance and throughout the throughout the, various functional areas. But for customers, I see the primary opportunity to simplify the effort of designing and commissioning and operating automation systems.

And so one of the best examples of where we’re implementing AgenTeq AI is in our FactoryTalk design studio. It’s a brand new cloud native, not, you know, factored, solution, that was originally designed to be on prem, but cloud native programming tool to design logics based automation systems, and it has a copilot that we developed, and, it is, able to dramatically reduce the amount of keystrokes to create a new system. It also can go out and to document these systems to make them easier to operate and maintain. That’s one example. Another example is with, the ability to take basic data about a driven load, being controlled by one of our drives and to be able to look at the health of that operation and looking at the signature of voltage and current coming back from that motor, being able to understand that you’re in a healthy condition, are you getting ready to throw a bearing or something like that.

And so simplifying the effort of, again, creating these systems, provisioning them and then to be able to operate them. We have an AI center of excellence that serves as a clearinghouse for all the businesses so that as they’re spinning up their own efforts, it’s not all gonna be centrally developed, but giving them the competencies to be able to do things in a common way across the organization, but still with specific applications for the drives business or the programmable control business or motion, whatever. I’m very happy with that, that pace and that trajectory. And we have very strong partners. We work closely with Microsoft, NVIDIA, with others in more application specific areas.

So importantly, we’re not trying to do it all ourselves. We look at the areas that we have expertise, we have differentiation, and we work with partners to make sure that we’re as efficient as possible.

Nigel Coe, Analyst, Wolf Research: Any more questions? Okay. I’ll continue. So, I think it’s fair to say that the current macro is very complex, very confusing, lots going on, lots of news flow from DC. What sort of environment given all your experience of managing through cycles, like Christian, what do you see right now?

I mean anything to worry about? I mean any demand pull ahead of tariffs or anything unusual out there you call out?

Blake Morett, Chairman and CEO, Rockwell Automation: There’s always plenty to worry about. But I will tell you, I think we’re managing in the appropriate way in that we’re being very prudent, with respect to add backs of cost. Right? Even as we return to growth, making sure, that we’re not bringing back costs, at the same rate so that we have a baseline that creates very attractive leverage as we do return to year over year top line growth, I think is the right way to be managing through this. On our product side, which services a lot of existing, plants around the world and certainly within The US, we’re seeing good sequential growth there.

We have seen some delays with respect to the more CapEx intensive projects that largely flow through our Lifecycle Services business and then the configured order portion of Intelligent Devices. Certainly, automotive remains weak as we talked about on the call. We see ecommerce warehouse automation as a real strong spot, life sciences, so pharmaceutical, and you’ve certainly seen all the announcements as well as strong energy, a little bit weaker, chemical, Trend Arrow is up there food and beverage, we’re seeing some positive signs, particularly among the machine builders that account for a lot of that business.

Nigel Coe, Analyst, Wolf Research: And then based on what you’re hearing from your partners, integrated partners, channel partners, customers, what are they waiting for to get some of these large projects moving again?

Blake Morett, Chairman and CEO, Rockwell Automation: Yes. So I had an opportunity earlier this week, to attend the National Electrical Distributors Conference and had a chance to talk to a few of our long standing partners. And I think, you know, what they’re seeing is consistent in that, you know, there remains there remains optimism in the market about the opportunity, going forward. And projects, even when they have been delayed, they’re delayed. They’re not being canceled.

I think when projects are being delayed, the most common, reasons that we’re seeing below a little more detail than just tariff related uncertainty is, one, the specific cost. People are wanting to make sure that their ROI for that business proposition remains robust and that tariffs and other cost changes, interest rates, things like that, you know, make it an attractive business proposition to implement that program. Second, on the other side is what about the demand from their customers? Have anything with the volatility between countries has that affected what they can expect in terms of demand from their end customers? And so they’re looking at that.

In some cases, related to that, if they’re a startup company, outside funding for that project, is that still solid for them? And then you start getting into the things that are always present, negotiations on terms and conditions. People are wanting to make sure that they’re protected against changes in the tariff regime and so on, making sure that they have all of that in order before moving forward with these projects. So those are the types of specific things that hearing.

Nigel Coe, Analyst, Wolf Research: And then the warehouseecom up I think 45% last quarter. I think you are the only company out there seeing this kind of growth in warehouseecom. So just wondering what’s driving that and sustainability of that growth?

Blake Morett, Chairman and CEO, Rockwell Automation: Sure. Let me talk about four elements of that. For context, that business represents a little bit in the area of 5% of our total revenue. So it’s not everything. And our data center exposure itself is relatively modest.

But what data center exposure we have is very strong. It comes primarily through Cubic, which was the acquisition of a Danish company we made a couple of years ago. It’s power distribution equipment, and everybody is well aware of the kind of power that data centers use, and that business is growing strong double digits. The second area would be in parcel handling. So think of companies like UPS and FedEx as they’re seeking to modernize their facilities, to be able to improve the balance between manual labor and advanced technology, to be able to increase their efficiency, and there’s a lot of investment going on there.

The third area would be in ecommerce and the growth of new fulfillment centers. People are back to building new fulfillment centers, and there’s a pretty high automation content there. And then the fourth really is more of a horizontal cut across a lot of, in particular, the consumer packaged goods, businesses where they have a certain amount of existing automation intensity in the make part of their operation. So making the shampoo or the candy bars or whatever, but where there’s still lots of manual effort going on and inefficiency in bringing material to resupply the line or taking finished pallets away and moving it to the loading dock or to the warehouse. And that’s that whole area that we’ve characterized as production logistics with mobile robots, independent car technology, certainly traditional PLCs, using digital twins to optimize the workflow through these operations, and we’re seeing a lot of activity there as well.

Great. Thanks, Blake. And I’d say I would just say, you asked about the duration. We do see this continuing into next year. We don’t see this as some single quarter type of spike.

We do see that demand as being persistent well into 2026.

Nigel Coe, Analyst, Wolf Research: In the time we got left, there’s five more minutes. So I want to there’s three more topics I want to touch on, but if anyone audience please pay them. Going back to the margin story, Christian. So obviously, we’ve got a target for this year in terms of cost reduction. When do you think you’ll be ready to help us dimensionalize the opportunity beyond 2025, ’20 ’20 ’6, ’20 ’20 ’7?

Christian Routhi, CFO, Rockwell Automation: Yes. So I think as we exit this year, we’ll give you an update on what our expectations are for 2026. There’s an aspect around this that and this is a good news story is that, yes, we have certain aspects that going to be annualized into ’26. Great. The other part is is that as volumes continue to grow, then we’re gonna capture benefits that we have not been able to get thus far.

That is gonna be a harder one to dimensionalize, to be frank. It’s gonna show up more in the core side of our business, and it’s gonna show up more in the incremental margin side and the margin expansion. It probably is not gonna show up on a a really nice chart that that that shows a waterfall of exactly, you know, what because again, it gets a little bit lost in in that. But the the nice benefit is that it allows us to do a better job of going back to it’s really hard to renegotiate with suppliers when you’re telling them that, and we’re not really gonna grow, you know, for the near near term. So being back to growth makes that a better part of the of the story.

And then getting to the next portion of it, which is, okay, how are we investing in ourselves and and what does that look like as we go into ’26? We’ll be able to dimensionalize some of that. It’s probably something that we’re gonna spend a little bit of time talking about in Investor Day in November. And then we’ll we’ll talk about more of the longer term plan. And I’m not sure if we’re ready to sign up for exactly what those numbers look like.

But keep in mind, we’ve been talking about for us since 2023 that we think Rockwell, the next target for us for operating margins is 23.5. Our current guide for this year has us at 20%. So three fifty basis point expansion from where we’re sitting, where we’re going to end this year, again, versus the guide. So let’s go achieve that and then let’s run through it and keep going. And so dimensionalizing that, I’d like to go achieve first and then we’ll start to put numbers out there.

Nigel Coe, Analyst, Wolf Research: That’s very fair. Dollars $3.50 is not a bad number. Tariffs, we obviously had some good news on the China tariffs since you reported results, I think. Since you report maybe?

Christian Routhi, CFO, Rockwell Automation: Yes, since

Nigel Coe, Analyst, Wolf Research: we reported. Yes. You had very nice price realization in the second quarter. Anything changing on the pricing side or the kind of measures?

Christian Routhi, CFO, Rockwell Automation: Yes. So we have a tariff based pricing or price recovery method that’s in place. Importantly for us and what we talked about on the call is that the tariff environment, it’s going to go up, it’s going to go down. We know that. It’s been that way.

It will continue to be that way likely. Our expectation and our commitment to our investors is that the impact on EPS is nothing, right? So it’s nil. Our intention is to offset it both from supply chain actions, but as well as pricing. And so the pricing number has come down somewhat.

To dimensionalize that, when we were on our call, it was one hundred and 20 five million dollars was a headwind for the second half. That number for us now after these pauses puts that number at 70,000,000 seven-zero million dollars So we have had some relief there. That’s made up of about $20,000,000 in Mexico, Canada tariffs, about 20,000,000 in China, both the back and forth on China, about 15,000,000 that is from acquisitions. And so those are a little bit harder for us to to have resiliency to lean into at the moment and about 15,000,000 from rest of the world and some of the other steel and aluminum tariffs. So in the interest of time, I’m happy to talk about price as well outside of tariff based pricing, but that’s a different question.

Nigel Coe, Analyst, Wolf Research: Yeah. I was going finish on what does an acquisition look like for Rockwell. Let’s go with pricing. I think that’s a good effect. Sure.

Christian Routhi, CFO, Rockwell Automation: So price realization was really strong for us in the second quarter at 3%. That price realization, importantly, none of that was related to tariffs. So tariff based pricing was quite minimal in Q2 as was tariff based cost. And so that price realization really came from two different areas. The first part was that we did pull forward our annual price increase, and that was done not as a for anything other than we wanted to clear the deck and and make sure that as we knew there was gonna be noise from tariff based price changes going up and down, that we didn’t wanna confuse it with a annual price increase at the same time.

So we we brought that forward and, again, brought some certainty for us. And frankly, there’s a little bit of an aspect around that we we didn’t want, you know, partners of ours or customers of ours taking advantage of trying to get ahead of a price increase if they knew it was coming to. So there was a there was one aspect around that. The the second part and and again, a really great driver for us in price realization in in in q two was the fact that we have tightened up our our our price realization policies and practices. And so there there are all sorts of ways that leakage happens on price.

That is, you know, you have a list to list number and then realized price is something typically a little bit less than that. And because we are in this situation of tariff tariff based pricing that allows us to tighten up and and say, you know what, in situations where maybe we would have had concessions before, we’re not going to do that right now. And so we’re we’re trying to make sure that, again, we’re realizing as much as we possibly can.

Nigel Coe, Analyst, Wolf Research: Okay. Great. And maybe just a quick one on acquisitions. Blake, any ambitions to white spaces to fill any technologies?

Blake Morett, Chairman and CEO, Rockwell Automation: Sure. I think we’ve got a great offering, great portfolio. And as we talked about right now, focuses on integrating the pieces, always on the look for annual recurring revenue sources that will be a good fit strategically as well as financially, looking at ways to increase share and market access outside The U. S. And Europe and in Asia.

And then whether it’s application specific technology or its existing profitable businesses that can be supercharged by running through our great distributor network, that’s another area that’s of interest as well.

Nigel Coe, Analyst, Wolf Research: Okay. Blake, Christian, that was a great discussion. Thank you very much.

Blake Morett, Chairman and CEO, Rockwell Automation: Yes. Thank you, Nigel.

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