As an indicator of manufacturing capital spending, Rockwell Automation Inc.’s order books are flashing bright yellow.
Speaking to analysts and investors earlier this month, Chairman and CEO Blake Moret said orders from Rockwell’s distributors and machine-builder clients came in slower than expected in the three months that ended on June 30. That led his team to lower its outlook for the current quarter—the fourth in Rockwell’s fiscal year—and the company’s full fiscal year.
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“The dominant theme for the first part of this year was the inventory issue at distributors and machine builders,” Moret said on a conference call. “As that dissipates, we’re seeing some pause in capital spend in manufacturing.”
As has been the case for the past year, Rockwell did book quarter-over-quarter orders growth. But project delays—Moret emphasized such push-outs haven’t translated to all-out cancellations—have spread from some clients in the automotive and food-and-beverage sectors in early 2024 to more industries, including semiconductors, life sciences, and energy.
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Moret sought to paint today’s capex market for Rockwell’s equipment, systems, and software as one focused on projects more focused on improvement than expansion.
“We look at not just potential capacity that [customers are] adding, but it’s about resilience, efficiency in existing facilities. It’s one of the things that excites us about the mobile robots, for instance […] Most of that’s going into existing facilities,” he said. “Customers, just like Rockwell, are working on their efficiency and their cost, regardless of what’s going on in the external environment.”
Moret’s assessment jibes with recent data and context from the Association for Manufacturing Technology. That group’s most recent report on machine tool orders showed that June numbers were up from May but down slightly from last year. But, noting a divergence between unit orders and their dollar value, AMT officials said “manufacturers are generally investing in more automated, task-specific solutions.”
What might change that and add back meaningful new-capacity capex? Interest-rate cuts and clarity about who will be the U.S. president—which will answer questions about energy policy and the future of various buckets of stimulus funds—come next January will help, Moret said. Until then, he expects slow order growth from one quarter to the next.
“Rather than a one- or two-quarter sharper bounce back, we think this is going to continue to be a gradual recovery,” Moret said. “Inventories are depleting, both at our distributors and our machine builders, but we have seen some weaker conditions in end markets.”
Shares of Rockwell (Ticker: ROK) were changing hands around $265 on Aug. 20. They’re down slightly over the past six months, leaving the company’s market capitalization at about $30 billion.
