Rockwell CEO says order growth hasn’t accelerated as expected

Destocking is proving a sticky wicket for Rockwell Automation Inc.

Blake Moret, chairman and CEO of the Milwaukee-based automation equipment and services giant, said March 20 that the accelerating order growth he and his team had expected this quarter hasn’t materialized.

The main cause: Rockwell’s machine-builder customers are still working down the inventories they accumulated in recent years when they over-ordered from Rockwell both to meet strong demand and to avoid more supply-chain pain than they were already dealing with.

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To be clear—as Moret was during his talk at the Bank of America Global Industrials Conference—Rockwell is still seeing growth from the trough it experienced late last summer. Orders, Moret said, are up more than 10% from last quarter. But their growth rate hasn’t picked up the pace since he and CFO Nick Gangestad reported results in late January.

“We do look at this as more of a timing issue than a softening of underlying demand,” Moret said.

Still, Moret also noted that his base case for the rest of Rockwell’s year “is that orders continue on their current trajectory” rather than accelerate further. As a result, sales and earnings per share for the company’s fiscal 2024 (which will end Sept. 30) are now likely to be near the low end of the range Moret and Gangestad have presented.

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Moret wasn’t the only executive speaking at BofA’s gathering to discuss the ongoing destocking dynamic: Jenny Parmentier, chair and CEO of Parker Hannifin Corp., told attendees that typical industrial down cycles will see orders fall year over year for somewhere between four and six quarters. Parker’s orders have been negative for four quarters in North America and five internationally.

“You look at it historically and you would have to believe that that’s going to turn at some point soon,” Parmentier said.

Shares of Rockwell (Ticker: ROK) fell more than 3% as Moret discussed the change in the market since late January. But they quickly recovered that ground and, helped by a positive tone from Federal Reserve Chair Jay Powell later in the day, closed trading March 20 up more than 1% at nearly $282. Over the past six months, they are essentially flat, leaving Rockwell’s market capitalization at about $32 billion.