Rockwell Automation Poised to Gain from U.S. Manufacturing Resurgence

One of President Trump’s major objectives with import tariffs is to strengthen the manufacturing sector in the United States. Tariffs, such as a 25% rate on goods from Canada and Mexico and an additional 10% on goods from China, are designed to make imported products less competitive compared to domestic alternatives. The intent is to encourage companies to manufacture within the U.S. Critics, however, caution that this may allow domestic manufacturers to raise prices, thus improving their profit margins, as seen by U.S. steel producers in 2018.

Amid various companies navigating the impact of tariffs, Rockwell Automation Inc. (NYSE: ROK) stands to gain significantly.

Rockwell Automation: A Leader in Manufacturing Solutions

Rockwell specializes in automation equipment, including factory robots and related technology. As foreign companies establish new facilities in the U.S., Rockwell Automation is positioned to supply critical automation products and services.

Recent announcements of substantial investments in the United States are particularly advantageous for Rockwell. These projects will require robust factory automation solutions and ongoing support.

The Onshoring Trend Enhances Rockwell’s Market Position

Historically, many American manufacturing operations shifted overseas to lower costs. However, the current administration is promoting a trend known as onshoring, which encourages companies to relocate manufacturing back to the U.S. to avoid tariffs. Additionally, attracting foreign investment is a key goal of this administration.

Noteworthy investments, such as the $500 billion Stargate project backed by Oracle Co. (NYSE: ORCL), Softbank, and Open.AI, alongside a $100 billion investment from Taiwan Semiconductor Manufacturing Company Ltd. (NYSE: TSM) and a $500 billion commitment from Apple Inc. (NASDAQ: AAPL), could drive demand for Rockwell’s automation tools, software, and services.

American-Made Products Bolster Competitive Edge

More than 70% of Rockwell’s products are manufactured in the U.S., potentially drawing business away from competitors like Siemens Aktiengesellschaft (OTCMKTS: SMAWF) and Mitsubishi Electric Co. (OTCMKTS: MIELY). This emphasis on local production allows Rockwell to maintain stable pricing, thereby increasing market share as onshoring accelerates domestic sales. The company focuses on enhancing factory efficiency, which can translate into improved profit margins for its clientele.

Positive Trends Indicate Potential Growth for Rockwell

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On February 10, 2025, Rockwell Automation released its fiscal first quarter results, reporting an earnings per share (EPS) of $1.83. This surpassed analyst consensus estimates of $1.58 by 25 cents. Company revenues, however, experienced an 8.3% year-over-year decline, totaling $1.88 billion, aligning with market expectations. Notably, orders increased by 10% over the previous year, and profit margins improved.

Conservative Forecasts from Management

Rockwell’s management provided conservative guidance for fiscal 2025, with anticipated EPS in the range of $8.60 to $9.80, and a midpoint at $9.20, slightly less than the consensus estimate of $9.24. Revenue forecasts suggest earnings around $8.1 billion, compared to the $8.13 billion estimate from analysts. The company expects sales growth to range between a decline of 5.5% and a slight increase of 0.5%, impacted by a negative foreign exchange rate of 1.5%. Management reiterated expectations for organic sales growth ranging from a decline of 4% to an increase of 2%.

CEO Shares Optimism Amid Tariff Environment

In remarks during a recent conference call, CEO Blake Moret noted plans for $250 million in productivity gains for fiscal 2025 driven by cost reductions and margin expansion. Sequentially, order volume grew, and backlog saw an increase due in part to significant multi-year projects within the life sciences, logistics, and automotive sectors.

Moret addressed the effects of tariffs, stating, “We are confident that we are managing the recently announced tariffs in a way that mitigates impact and maximizes our strength as a large U.S. manufacturer. While we anticipate near-term disruptions in the global supply chain, both for us and our customers, we remain steadfast in our belief that Rockwell stands to benefit from policies that enhance U.S. manufacturing.”

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The views expressed in this article belong to the author and do not necessarily represent those of Nasdaq, Inc.