UPDATE 3-Rockwell Auto results fall short of forecasts
(Adds CEO interview, analysis, takeover speculation, byline; updates share price)
NEW YORK, April 23 (Reuters) - Diversified manufacturer Rockwell Automation Inc (ROK.N) posted lower-than-expected quarterly earnings on Wednesday on disappointing operating margins, sending its shares down as much as 11 percent and touching off takeover speculation.
The company, whose engineering services and computer systems are designed to make manufacturing cheaper and faster, estimated 2008 operating margins falling about a point from 19.7 percent in 2007.
But Rockwell Chairman and Chief Executive Keith Nosbusch painted a rosier picture for the second half of the year, and the company affirmed its full-year profit forecast of $4.25 to $4.45 per share. Analysts, on average, expect $4.34 per share.
However, investors aren't convinced, said analyst Nick Heymann of Sterne Agee.
"These guys are flying magic carpets," he said, noting that Rockwell's outlook assumes economic acceleration in Europe and stability in North America despite evidence both economies will continue to slow.
Heymann said Rockwell gave an optimistic outlook to prop up its share price in an attempt to stave off takeover talk, citing Tokyo-based Yokogawa Electric (6841.T) and rival Siemens AG (SIEGn.DE), based in Munich, as possible buyers.
However, Nosbusch, in an interview with Reuters, brushed off speculation that the company is for sale,
"We believe that the best way for Rockwell to create long-term shareholder value is to remain independent," he said.
Nosbusch attributed pressure on margins in the first half of the year mainly to an unexpected volume decline in its automation computer system and software business, which is more profitable than its engineering services unit.
He said order data already shows more revenue strength in the computer system and software business for the third quarter, and investment spending will decrease in the second half of the year as well.
Net profit in the fiscal second quarter ended March 31 was $142.8 million, or 96 cents per share. The average Wall Street forecast was $1.02 per share, according to Reuters Estimates.
In the year-earlier quarter, net income was $729.3 million, or $4.45 per share. Excluding a one-time gain from discontinued operations, year-ago profit was $107.1 million, or 65 cents per share.
Quarterly revenue rose 17 percent to $1.41 billion, topping analysts' average estimate of $1.37 billion.
Milwaukee-based Rockwell has warned Wall Street that it faces uncertain economic conditions in its industrial automation business. Its sales depend on factory owners wanting to boost expansion or improve efficiency, though some investors argue that a downturn would make it all the more important for manufacturers to focus on productivity gains. Continued...
