UPDATE 4-Rockwell Auto profit drops, warns outlook unclear

* Q4 EPS 20 cents vs. year-earlier 87 cents

* Sets FY 2010 EPS target $1.25-$1.75

* Sees weak start to FY 2010, stronger second half

* CEO sees growth returning in China, India, Brazil

* Shares down as much as 2.5 pct (Adds stock action, CEO quote, byline)

By Scott Malone

BOSTON, Nov 9 (Reuters) - Rockwell Automation Inc (ROK.N) said quarterly earnings plummeted 77 percent, as a lingering economic downturn prompted its industrial customers to hold off on purchasing systems that help factories run more smoothly.

The company set its initial fiscal 2010 profit forecast in a wide range that called for anything from an 11 percent rebound to a 19 percent drop.

"At this point, we would characterize business conditions as stable, but at demand levels well below the peak of the cycle," Chief Executive Officer Keith Nosbusch told analysts on a conference call on Monday. "We expect a recovery, but no one knows what the shape of the recovery will be."

The sharp drop in quarterly profit and hazy outlook may take the wind out of the sails of a stock that has sharply outperformed the industrial sector this year, analysts said.

"(Rockwell) is a short cycle business," but given its 2010 outlook, "investors will have to reconsider if it's as early cycle as they believe in bidding the shares up," Citigroup analyst Jeffrey Sprague wrote in a note to clients.

So far this year, Rockwell shares are up some 34.4 percent, outpacing the 13.5 percent rise of the Standard & Poor's capital goods industry index .GSPIC.

Rockwell shares fell as much as 2.5 percent in early New York Stock Exchange trading on Monday. By mid-morning they were down 46 cents, or about 1 percent, at $42.88.

Rockwell officials argue that, facing an uncertain economy, its industrial customers will need to resume investing in automation equipment as they work to take operating costs out of their businesses.

PROFIT TUMBLES

Earnings fell to $28.9 million, or 20 cents per share, in the fourth quarter that ended on Sept. 30, from $125.6 million, or 87 cents per share, a year earlier.

Revenue fell 27.6 percent to $1.07 billion.

Factoring out restructuring charges, profit was 37 cents per share. Analysts differed on whether this result trailed or exceeded a wide range of profit estimates that extended from 19 cents to 34 cents per share.

The consensus expectation had been for 27 cents per share, excluding items, on $1.05 billion in revenue, according to Thomson Reuters I/B/E/S.

Milwaukee-based Rockwell set a fiscal 2010 profit forecast of $1.25 to $1.75 per share.

Deutsche Bank analyst Nigel Coe said he was surprised to see the low end of the company's 2010 forecast at $1.25 per share.

Rockwell forecast 2010 revenue of $4.1 billion to $4.4 billion, expecting sales to fall through the first half of the year and start to bounce back in the third and fourth quarters.

The company, which in its just-ended fiscal year generated about half its sales outside the United States, is looking for a return to growth in China, India and Brazil next year, CEO Nosbusch said in an interview. [ID:nN09258721]

"The emerging markets will lead the recovery," Nosbusch said.

Rockwell's rivals include Germany's Siemens AG (SIEGn.DE) and Japan's Mitsubishi Electric Corp (6503.T). (Reporting by Scott Malone; Editing by Derek Caney and Maureen Bavdek)