Rockwell Automation increased its top and bottom-line outlook for its 2023 fiscal year, citing a gradual improvement in supply chains.
The Milwaukee-based maker of automation equipment and software now expects its reported sales to increase between 10% and 14% for the year, up from an expected 7.5% to 11.5% increase at the start of the fiscal year.
The higher level of growth amounts to nearly $200 million in additional revenue and would give the company almost $8.7 billion in sales for the year.
In its first fiscal quarter, Rockwell saw reported sales increase 6.7% to $1.98 billion. Organic sales were up 9.9% with acquisitions adding 0.8% to growth and foreign currency exchange cutting into growth by 4 percentage points. The company also saw its net income up more than 59% to $384 million and adjusted income up more than 13% to $285.3 million.
For the full year, Rockwell is predicting organic growth of 13% at the midpoint, up from 11% in its prior guidance. The company also increased its guidance for earnings by 14.6% at the midpoint, calling for diluted earnings per share of $10.99 to $11.79. In fiscal 2022, diluted earnings per share came in at $7.97.
Rockwell has seen strong demand for its products in recent years and executives said the company has a record order backlog that grew compared to the prior quarter. Delivering on the strong demand has been complicated by supply chain challenges, including the availability of semiconductors.
Blake Moret, chairman and chief executive officer of Rockwell Automation, said the supply of semiconductors is gradually and generally improving and noted the company is working to mitigate issues.
“We use a lot of chips across our product lines,” Moret said, adding “in general, we’re seeing chips improve across a broad landscape, but it’s not going to happen overnight.”
“The view is optimistic, but all it takes is one chip in a product to not be able to ship it,” he said.
Moret noted some of Rockwell’s products have been able to return to pre-pandemic levels for lead times, but the majority remained at elevated levels. He expects the company’s backlog to continue to grow throughout the year.
Rockwell’s higher guidance and strong demand comes amidst economic uncertainty and concerns about a recession. Moret said the macroeconomic environment is dynamic and Rockwell is trying to take a conservative approach, prudently adding resources to fuel growth where needed.
“We’re very aware of the macro,” Moret said. “It’s just not going to have as much of an effect on us in the current fiscal year because of the huge backlog that we have and we’re building backlog that’s going to go well into ’24 and beyond.”