Rockwell Automation

IThe business

Rockwell Automation sells the equipment and software that run factories. The business began as the Allen-Bradley Company in 1903 and has been public in its present form since 1996. It is based in Milwaukee, employs about 26,000 people and sells in more than 100 countries.⁵ Its products are the controllers that run a production line, the drives and motors that move things on it, the safety, sensing and networking gear around them, and the software and services that design, monitor and repair the whole system. It calls itself the world’s largest company dedicated to industrial automation. Its 10-K names Siemens, ABB, Schneider Electric, Emerson, Mitsubishi Electric, Honeywell and Dassault Systèmes as the major competitors.⁵

It reports in three segments. Intelligent Devices makes drives, motion, safety, sensing and other components. Software & Control sells the Logix controllers and the software that goes with them, along with simulation, networking and security. Lifecycle Services sells consulting, project work and recurring services such as cybersecurity and remote monitoring.⁵

Three facts about its shape matter. First, it is mostly a North American company. Of fiscal 2025 sales of $8,342M, $5,270M or 63% was in North America, $1,488M in Europe, the Middle East and Africa, $1,024M in Asia-Pacific and $560M in Latin America C (calculated).⁵ Second, it sells mostly through others. About 65% of sales go through independent distributors, and the two largest distributors together account for about 20% of total sales.⁵ Third, it serves three kinds of customer. Discrete makers, such as automotive, semiconductor and warehouse automation, buy machines and lines. Hybrid makers, such as food and beverage, life sciences and tyres, mix the two. Process industries, such as energy, mining and chemicals, run continuous plants.⁵ The company puts the market it can address at about $120B.⁵

A business that follows capital spending

Customers buy this equipment when they build or expand plants, so sales follow factory investment and not consumer demand. The record shows it. Sales were $6.3B in fiscal 2020 and $9.1B in 2023, after pandemic-era catch-up and price rises. They then fell 8.8% to $8.3B in 2024.⁵¹² In 2025 sales grew 1%: prices added 3 points and volume took off 2.⁵ Backlog fell from $3,091M to $2,878M in that year.⁵ This year is the recovery. Sales for the first nine months were $6,657M, up 10% reported and 9% organic, which strips out currency and the Sensia businesses that were sold back.²

The company has raised its guide twice this year. In November 2025 it forecast sales growth of 3% to 7% and adjusted earnings of $11.20 to $12.20 a share. In August it forecast 7.5% to 9.5% and $13.00 to $13.30.⁴² Sales of about $9.0B would be almost exactly the $9.06B of 2023 C (calculated).²¹² So the stock trades near its high in a year when sales only get back to a level they first reached three years ago.

Where the growth comes from

In the quarter to June, sales were $2,313M, up 8% reported and 10% organic.² By segment, Software & Control grew 18% organically, Intelligent Devices 10% and Lifecycle Services fell 2%.² By region, North America grew 12% organically, EMEA 7% and Asia-Pacific 8%, and Latin America fell 3%.² Management described the end markets on the call. Warehouse and e-commerce sales were up 30%. Semiconductor was strong, helped by AI infrastructure spending. Automotive was up low double digits, with “green shoots of new projects.” Life sciences was up 10%. Energy was up high single digits, mining fell mid single digits, and food and beverage was up mid single digits without the large capital projects that would mark a real recovery.³ The CEO also called data centres a growth market, where Rockwell sells power distribution, power control for chiller makers, and Logix controllers in central utility plants.³ This is a third-party transcript with inconsistent speaker labels, so I use it for what was said and take numbers from the filings.

Two other things lifted the quarter. One is price: management guided about 250 basis points for the year, with about 100 from tariffs and 150 underlying, though the third-quarter contribution was about one point.³ The other is mix: software and controls grew fastest and carry the best margin. The result was an enterprise operating margin of 22.3% against 19.5% a year earlier, and free cash flow of $654M against $489M.²

The June quarter, and what I leave out

Reported earnings flatter this quarter in two ways. The Sensia joint venture with SLB was dissolved on 1 April, which brought an $18M gain in the quarter and discrete tax benefits that cut the GAAP tax rate to 13.2%, against 19.2% on the adjusted basis.² I leave all of that out. The second flattery is the 10% organic growth itself. It is measured against a year that grew only 1%, so part of the rate is a rebound and not a new level E (estimate).⁵

What changed this year

The company plans to invest more than $2B over five years in plants, digital systems and people, including a new factory in New Berlin, Wisconsin that it says will be its largest anywhere.⁵¹⁵¹⁶ Capital spending ran at about 3% of sales in fiscal 2026, and management expects about 4% in fiscal 2027.³ A Supreme Court ruling in February 2026 made tariffs paid under the IEEPA refundable, and the company has filed claims. No refund is booked, and none is in any figure here.¹⁶ And on 21 September the chief revenue officer, Scott Genereux, said he will retire on 31 December. He stopped being the sales chief on 30 September.¹⁷

IIThe moat

The protection comes from something dull and sticky. A factory’s control program is written for one family of controllers. Engineers learn it, plants run it for twenty years, and the cost of switching is not the price of a controller. It is the cost of rewriting and re-testing the logic of a line that makes money every hour it runs. Rockwell’s Logix family, with its programming software, sits at the core of everything it sells. The company says it is the only provider that supports discrete, process, batch, safety, security, motion, robotics and power control in one hardware and software environment.⁵ That is a company claim, and I weigh it as one.

There is public evidence for the stickiness in the profit. Software & Control earned a 33.7% segment margin in the first nine months, on sales up 17% organically.² On the call, management said controller shipments had only recently returned to pre-COVID unit volume, and that it expects to exceed Logix unit volume this year and is gaining share.³ I treat the share claim cautiously, because no figure was given.

Evidence it is widening

Software is the best evidence. Software & Control grew 17% organically in nine months and 18% in the third quarter, and its margin rose 4.6 points in nine months.² The company is adding operational software, industrial cybersecurity (it bought Verve in November 2023) and autonomous robots for factories (Clearpath and its OTTO line, bought in October 2023).⁵ Price is a second sign. Pricing added 3 points to sales in fiscal 2025 while volume fell 2, and 3 points again in the first nine months of 2026.⁵¹⁶ A supplier that can raise prices in a year of falling volume has some grip on its customers.

Evidence it is narrowing

The plainest warning is the recurring-revenue line. The 10-K for fiscal 2025 listed continued double-digit growth in annual recurring revenue in its growth framework. The June 10-Q words it differently: recurring revenue adds about 1% a year to overall growth.⁵¹⁶ Those may be one target stated two ways, since if ARR were about a tenth of sales, 10% growth would add about a point. I found no dollar figure for ARR, so I cannot tell whether the bar was lowered. What is clear is that organic ARR grew 6% in the third quarter, which management called below its expectations, and that it now expects mid single digits for the year.²³ The fiscal 2025 bonus plan had a 12% target for organic ARR growth, and it paid nothing for that measure.⁷ Siemens’ Digital Industries unit, by comparison, reported 11% organic ARR growth, to €5.7B.⁶

The second warning is how much of the growth is price. Of 9% organic growth in nine months, price supplied about 3 points, and in the third quarter the underlying price was “close to nil.”¹⁶³ The third is cost. The CFO described memory-chip inflation as a double-digit-million headwind in the second half and said he does not expect it to stabilize soon.³

IIIThe competitive advantage

The cleanest way to place Rockwell is next to the two rivals with figures from the same period. The margin measures differ, so I show them as reported and do not net them.

Where Rockwell wins

It wins on growth right now. Organic sales were up 10% in the June quarter, against 7% underlying growth at Emerson in the September quarter and 10% comparable at Siemens’ unit. The profit follows: a 22.3% enterprise operating margin is 3.6 points above Siemens’ 18.7% in the same quarter, though the measures are not identical.²⁶¹⁸ It wins on the base it sits on, too. More than 60% of its sales are in North America, where organic growth was 12% in the third quarter and in nine months.⁵² A control engineer in Ohio or Ontario is, I think, more likely to know Logix than any other platform, and the company’s own filings stress the same integrated architecture. I cannot prove that with a published market share.

Where it loses

It loses on software scale. Siemens’ Digital Industries software business alone had €1.8B of revenue in the quarter, up 15%, against $751M for Rockwell’s whole Software & Control segment, controller hardware included.⁶² It loses on margin to Emerson on the narrower measure, 29.1% against Rockwell’s 23.8% segment margin, and Emerson’s underlying orders were up 14% in the quarter on what it called exceptional long-cycle project activity.¹⁸² And it loses on recurring revenue, where Siemens grows ARR at nearly twice Rockwell’s rate.⁶²

It also depends on others in a way its rivals mostly do not. The two largest distributors are about a fifth of sales.⁵ If one of them changes how much stock it holds, as distributors did in 2024, Rockwell’s sales move by more than its customers’ real demand does. That is a feature of the structure and not a charge against management.

Emerson is the closest comparison. At the current prices, Rockwell’s shares cost 33.8 times the middle of its adjusted earnings guide for fiscal 2026, and Emerson’s cost 25.9 times its adjusted earnings for the year just reported C (calculated).²¹⁸²⁰¹ Rockwell is growing faster this year from a weaker base, and Emerson earns the higher margin. That gap is the center of the valuation section.

IVManagement

Blake Moret has run the company since July 2016 and has been chairman since January 2018. He started as a sales trainee at Rockwell in 1985.⁷ He holds both jobs, and the board has a lead independent director, James Keane, in place since 2023.⁷ The board grew from ten to eleven in April 2026 with the election of David Zapico.²¹ In February shareowners approved a 2026 incentive plan with 10.6M shares, or 9.5% of the shares outstanding, and in October 2025 the board renewed change-of-control agreements for the top officers through 1 October 2028 C (calculated).²²²³ The finance chief, Christian Rothe, joined in August 2024 from Graco, where he ran an industrial division.⁵

How they are paid, and what that pays them to do

Moret’s pay for fiscal 2025 was $15.4M: $1.21M of salary, $7.7M of stock awards, $3.3M of options, a $1.74M bonus and $1.4M of pension value. The year before it was $16.4M and the year before that $16.8M.⁷ His pay was 277 times that of the median employee, who earned $55,692.⁷ Salary did not change in fiscal 2025.⁷

The bonus is built from four measures. Adjusted earnings per share count for 40%, organic sales growth for 25%, free cash flow for 20% and organic recurring-revenue growth for 15%. Adjusted EPS has to exceed $9.20 for anything to be paid. In fiscal 2025 adjusted EPS paid 82% of its weight, sales 52%, free cash flow the maximum 200%, and recurring revenue nothing. A 10-point culture adjustment lifted the total to 95.7% of target.⁷

The way these measures can mislead is plain. Adjusted EPS leaves out the amortization of acquired intangibles, legacy asbestos charges and restructuring, so it is a friendly count of profit.² Free cash flow can be flattered by timing, and in 2025 it was helped by no incentive payout in the first quarter and lower tax payments.⁴ The one measure that tests the software story, recurring revenue, paid zero.⁷ I count that in the board’s favour: it did not pay for a miss. The June 10-Q now describes the recurring-revenue goal as about a point of yearly growth; without ARR dollars I cannot tell whether that is a lower bar.¹⁶

The long-term pay is 40% performance shares, 30% options and 30% restricted stock units. Performance shares pay by total return against three groups of S&P 500 companies: capital goods, software and services, and technology hardware. They can pay from zero to 200%. The 2023 to 2025 grant paid 70% of target, at the 35th percentile.⁷ That is an honest test, and the result was a miss. The options and share units vest with time.⁷

How much of their own money is in

The CEO’s guideline is six times salary, in shares and share units but not options. All named officers met the guidelines at 30 September 2025.⁷ At 1 November 2025 Moret owned 84,039 shares outright, worth about $37M at $443.88, plus rights to 445,025 more through options and share units.⁷ That is a real stake. The directors’ and officers’ group, 23 people, held 0.76% of the company.⁷

The trading is a different matter. I read all 96 Forms 4 filed from October 2025 to October 2026. There were 165 sale lines and no open-market purchase. Insiders, mostly officers, sold about $65M of stock, and Moret was $27.8M of that, including 61,700 shares from options struck at $136.40, sold near $392 in November 2025 C (calculated).⁸ These are normal sales after earnings, and many follow option exercises. But nobody at the top bought the stock at $350, or at $400, or has bought it since. At $443.88 the company’s own buyback is the only buyer inside the building.

The two largest holders are index managers. At the proxy date Vanguard held 11.88% and BlackRock 7.6%.⁷ Those figures come from filings dated February 2024 and February 2025, so they are old.

What they did with capital over a full cycle

Over the ten years to fiscal 2025 Rockwell produced $10.0B of free cash flow, or $9.4B after stock pay C (calculated).¹²⁴ It used that cash and more. It paid $4.9B in dividends, bought back $5.5B of stock and spent $4.1B on acquisitions, which is $4.6B more than the cash it made. Net debt rose from $0.4B to $2.8B and covered part of the gap C (calculated).¹² Diluted shares fell from 131.1M to 113.1M, or 14%.¹²

The buyback record is better than most. In fiscal 2018 and 2019 Rockwell spent $2.5B on 14.4M shares at about $173, a price the stock has not been near since 2020.¹² Since then it has bought less and at higher prices: $1.2B for 5.0M shares across fiscal 2020 to 2023 at about $235, and $754M for about 1.9M shares so far in fiscal 2026 at about $397. At $443.88 the remaining $1.2B of authorization would retire about 2.7M shares, 2.4% of the company C (calculated).² My base value is well under that price, so I cannot call buying here cheap.

Overall: the buybacks were very well timed, the acquisitions were reasonable, and the balance sheet is conservative. The weak point is the incentive pay: the largest weights sit on measures that exclude real costs. The evidence on management’s skill is less in the pay table than in the cycle. Margin held up in 2024, the year sales fell 9%, with a total segment margin of 19.3% against 21.3% in the peak year.⁵ That is a good sign for the next downturn.

VFinancials

Ten years of Rockwell show a company that grows slowly and returns most of its cash. Sales have compounded at 4.0% a year since fiscal 2016, and GAAP earnings per share at 3.6%, helped by a 14% fall in the share count C (calculated).¹² The stock rose 3.8 times in that time, from $118 to $443.88, so most of the gain came from a higher multiple and not higher earnings C (calculated).¹

What an owner could really take out

The company’s adjusted figures are higher than what an owner receives, and the gap changes from year to year. For fiscal 2026 the company guides adjusted earnings of $13.00 to $13.30 a share and GAAP earnings of $12.72 to $13.02. On about 112.2M diluted shares, the midpoints are adjusted income of about $1.48B and GAAP income of about $1.44B C (calculated).²³ The CFO said free cash flow is expected to be about 100% of adjusted income.³ Take off about $92M of stock pay, which I do not add back, and the owner’s cash is about $1.38B E (estimate). That is 94% of adjusted income, and about 2.8% of the market value.

The record for the last three years is less steady. Owner cash was $1.13B in fiscal 2023, $0.54B in 2024 and $1.27B in 2025, against adjusted income of $1.42B, $1.13B and $1.19B C (calculated).¹²⁴ Over those three years owner cash was 79% of adjusted income. In 2024 a large bonus payout and lower payables drained cash.⁵ In 2025 it came back, helped by no bonus payout in the first quarter and lower tax payments, even after a voluntary $70M pension contribution.⁴ So the gap between earnings and owner cash is mostly timing, and a business that follows capital spending has large swings in working capital. The ten-year ratio, owner cash at 101% of GAAP net income, is the one I trust more than any single year.

What does it cost to stand still? Capital spending was about 3% of sales in fiscal 2026, about $270M, against depreciation of about $185M.²¹⁶ Standing still takes roughly the depreciation, and the rest is growth, mainly the New Berlin plant. Free cash flow is after all of it. I include the extra capital in my forecast: net spending above depreciation of 2.0% of sales for three years, then 1.2%.

Quality of earnings

Four things deserve a footnote. First, fiscal 2025 GAAP earnings of $7.67 a share sat $2.86 below adjusted earnings of $10.53, and $1.88 of that was one-off: $0.97 for the Sensia impairment and $0.91 for the asbestos accounting change.⁴ The rest is mostly amortization of acquired intangibles, which is non-cash but is the price of past deals. Second, in fiscal 2026 the two measures nearly meet, with GAAP only $0.28 below adjusted at the midpoint, because gains and tax benefits from the Sensia dissolution offset the same kinds of charges C (calculated).² Third, the tax rate. GAAP tax was 15.3% in nine months, while management guides an adjusted rate of 19.5% for the year because of the global minimum tax.²³ I use 20%. Fourth, the base is rebounding: nine-month enterprise operating profit rose 31% while sales rose 10%, so operating leverage did much of the work, and it can run in reverse.²

The balance sheet

At 30 June debt was $3.26B, of which $2.57B was long-term and $688M short-term. Cash was $479M, so net debt was $2.78B C (calculated).² That is about 1.4 times fiscal 2026 enterprise operating profit of about $1.9B C (calculated). The company had $1.5B of undrawn credit running to November 2030, with a covenant that EBITDA be at least three times interest.¹⁶²⁴ The pension plans were underfunded by $121M and retiree medical plans by $41M at the last year end.⁵ Equity is only $3.5B because buybacks have outrun retained profit, so return on equity says little. The company’s own measure, return on invested capital, was 18.4% for the twelve months to June 2026 against 16.3% a year earlier.² I do not add the pension shortfall to debt: it is small, and the pension cost is already in profit.

VIValuation

First, how this goes badly wrong

Before the numbers, I asked what would most likely ruin this business, or this purchase, and worked back. Three things could, and none needs a surprise.

• The cycle turns. This company sells to people who build and expand factories. In fiscal 2024 sales fell 8.8% and the segment margin fell two points, and in 2020 sales fell 5%.⁵¹² A fall like 2024 from a base of $9B takes about $0.8B out of sales and, if profit falls at the same 50% rate that management says it rose this year, about $0.4B out of profit E (estimate).³ The stock would not fall by the same percentage. It would fall by more, because it is priced for growth.
• The price already holds the good case. At $443.88 the shares cost 34 times this year’s adjusted earnings. If sales grow 6% and the margin reaches 25%, which I think is a good outcome, an owner earns about 6.8% a year E (estimate). The business can do well and the shares can still do poorly.
• The software story stalls. The company’s own recurring revenue grew 6%, below plan. About three of the nine points of organic growth this year were price, and price tends to fade.²³ If growth settles at the rate of the economy, Rockwell is a good industrial company, and the multiple that goes with that is not 34 times.

All three are versions of one question: is Rockwell a compounder, or a cyclical with a strong franchise that is having a very good year? That sets my bear and base cases. I keep a fourth risk outside the model, because I cannot size it: a shift in how factories are programmed, toward open software and AI-written control logic, which would weaken the lock-in that the Logix base gives.

What the price implies

At $443.88 the market values Rockwell at $49.5B on 111.5M diluted shares, the 111.05M on the 10-Q cover plus 0.5M of option dilution C (calculated).¹¹⁶ Add $2.78B of net debt and the enterprise value is $52.3B C (calculated).² That is 33.8 times the middle of the adjusted guide for fiscal 2026 of $13.15, 33.5 times the Nasdaq consensus of $13.26, and 29.8 times the $14.92 consensus for fiscal 2027, or 26.4 times the $16.82 for 2028.²²⁵ The owner yield is 2.8% E (estimate), against a 4.90% ten-year Treasury.²⁶ The dividend of about $5.5 a share yields 1.2% C (calculated).² The close was 0.6% below the $446.38 of 3 November, about level with a week ago, 1.5% below a month ago and 22% above a year ago; the closing range over the year was $348.51 to $495.08 C (calculated).¹

What does it pay for? Holding the margin flat at today’s 21.5%, it needs sales to grow 18.5% a year for ten years. If the margin rises to 25%, it still needs 15.7%, and at Emerson’s 28% it needs 13.7%. Sales have grown 4.0% a year over the last nine years, and 16.7% in the best year, 2023, which was boosted by price.¹² On my base growth, the margin would have to reach 55% by 2036 C (calculated). The market is pricing a decade that Rockwell has never had. It may be right that this decade is different, because plants are being built in a way they were not in 2016, and I take that up below.

A check against the market’s own habit

There is another way to look at the same price, and it is kinder to the stock. At the end of six clean fiscal years, 2017 and 2019 to 2023, the shares closed at 24 to 28 times that year’s GAAP earnings C (calculated).¹¹² Twenty-six times the GAAP guide for fiscal 2026, about $12.87 at the midpoint, is $335. Twenty-six times the fiscal 2027 consensus of $14.92, which is an adjusted figure and so a generous comparison, is $388 C (calculated).²²⁵ So by the market’s own habit, the price is 14% to 32% above where it has usually been, and not twice it. My $206 base value is 16 times the GAAP guide, below any year-end multiple of the decade, and my $117 bear value is below every close in my ten-year price file.¹ The gap between those two views is the discount rate. The multiples suggest the market has asked about 8% or 9% from this stock for most of ten years E (estimate), while my rate is 10.5%. At 8% my base value is $327 and my bull $440, about the price. I come back to the rate below.

What I cannot judge

Two inputs decide this valuation, and I cannot know either. The first is whether the current upturn is a new level of factory building or one more cycle. Data centres, chip plants, warehouse automation and reshoring are real and are in the numbers, but no one knows how long they last. The second is the normal margin. The company reached an enterprise margin of 21.5% this year, 2.6 points above last year, and the segment margin in the best earlier year, 2023, was 21.3% before corporate costs.³ Mid-cycle could be 19%, 22% or 26%. So here is a range and not one number. Read my $206 beside the grid.

The discount rate

I use 10.5%. The ten-year Treasury yields 4.90%, and Damodaran’s implied equity risk premium was 4.41% on 1 November.²⁶²⁷ My ten-year beta on month-end returns is 1.45, which gives 11.3%. The five-year beta of 1.50 gives 11.5% and the three-year beta of 1.43 gives 11.2% C (calculated).¹²⁸ I do not take the raw figure. A beta estimated from past returns tends to drift toward 1, so I give it two-thirds weight and add one-third of 1.0, which makes 1.30 and a rate of 10.6%, and I round to 10.5%. That is the same as my Broadcom page and above the 9.0% on my Visa page, because a business that follows capital spending is less steady than a card network. The sensitivity table shows both 10.5% and the raw beta’s 11.3%. If the rate were lower, the answer would move up, and the table shows that even 8% leaves the base at $327.

Three cases

The model is simple on purpose. I set sales growth and the enterprise operating margin for each year from fiscal 2027 to 2036. Enterprise operating profit is the company’s own measure: profit after corporate costs and stock pay, before the amortization of acquired intangibles and one-off items. I tax it at 20%. Then I take off capital spending above depreciation (2.0% of sales for three years while New Berlin is built, then 1.2%) and 15% of any added sales for working capital. Stock pay is already an expense and I do not add it back. Fiscal 2026 results are not out, so I take its sales as $9.05B, the middle of the 7.5% to 9.5% guide, and I start from $8.93B because the Sensia businesses that were sold back brought in about $62M a quarter and do not return E (estimate).² There are no acquisitions and no extra buybacks in the cash flows.

My base fiscal 2027 earnings, using the same rough rules for interest, tax and a falling share count, come to about $14.46 a share, against the Nasdaq consensus of $14.92. Fiscal 2028 comes to $16.21 against $16.82, and 2029 to $18.05 against $18.42 E (estimate).²⁵ So my base sits within 4% of the Street for three years. The disagreement is not about the next few quarters. It is about what a business like this is worth if the cycle repeats.

Where would $11.3B of fiscal 2030 sales come from, up from about $9.0B this year? Most of it is volume from the upturn already under way and the rest is price and software. Compare the nine years to 2025, when sales grew 4.0% a year. My base is about 5.8% a year for four years, a bit above that, which already assumes the upturn is worth more than a normal one E (estimate).

The price sits 115% above my base, and above the top of my range, and that is the plain result. But why might the market be right? Because it can see what I can. Orders are strong: organic sales rose 10% in the June quarter, warehouse automation 30%, and semiconductor and data-centre demand is lifting power and control sales.²³ The guide was raised twice.² The software business earns 34.8% and is growing 18%.² A rival, Emerson, reported underlying orders up 14% for its September quarter and gave a plan for another year of earnings growth of about 10%.¹⁸ And the stock has traded at 24 to 28 times earnings for most of a decade, so its holders have been rewarded for a high price before. If there is a multi-year capital-spending upturn tied to AI infrastructure, power and reshoring, my base is too low, and my bull case, which is the one that fits that story, is still only 8.0% a year at this price E (estimate).

Other uses of the same dollar

The ten-year Treasury pays 4.90%. At $443.88 my base cash flows for Rockwell return 6.8% a year and my bear 5.3%, my bull 8.0% E (estimate).²⁶ So the bull case beats the Treasury by three points, and the base case by two. That is thin pay for the risk of an equity that falls with the cycle.

The closest comparison is Emerson, which sells automation software, controls and devices to many of the same plants and is named in Rockwell’s 10-K as a competitor.⁵ At its close in Q4 2026 it was $170.44, 25.9 times its adjusted earnings of $6.59 for fiscal 2026 and 23.5 times its outlook of about $7.25 for 2027.¹⁸²⁰ Rockwell is at 33.8 and 29.8 times, on consensus for the second figure. Emerson’s free cash flow of $3.5B is 3.7% of its market value of $95B, against 3.0% for Rockwell C (calculated).¹⁸²⁰² Emerson has a margin of 28.2% on its adjusted measure, though it carries about $10.4B of net debt, nearly four times Rockwell’s.¹⁸ Growth and net debt favour Rockwell. Margin, multiple and cash yield favour Emerson. The measures differ. On my Emerson page the price is 51% above my base value of $113, and my base cash flows return 7.5% a year at $170.44, against 6.8% here. I use 9.5% there and 10.5% here, so I would not lean on the gap. It does show that the same dollar buys more earnings and cash in the nearest rival, and that the rival is also priced above my range. It is the best alternative I have.

Among pages on this site, Mastercard returns 8.4% a year on its base case, from a price 13% above its base value, and Lockheed Martin 6.6%, from a price 19% above. Those pages use their own prices and rates, so I treat gaps of a point as noise. Rockwell’s base return of 6.8% is in the same range as Lockheed’s and below Mastercard’s. What differs is the gap between price and value: 115% above the base here, against 13% and 19% there, because I require 10.5% and the cash flows here are a small part of the price.

What past lows looked like

The stock has fallen more than 30% from a record high three times in ten years: 32% in 2018, 42% in the 2020 crash and 46% from December 2021 to June 2022 C (calculated).¹ The 2022 low close was $191, about 24 times fiscal 2022 GAAP earnings of $7.97 and below my base value.¹¹² The March 2020 low close was $121. My bear value of $117 sits just under that, so it is not a remote price: the stock was close to it six and a half years ago. And my base value of $206 is where the stock last closed on 18 July 2022.¹ Both are real prices that the stock has paid before.

The margin of safety

• Price$443.88Close, Q4 2026 [1]
• Base value$206My estimate E (estimate)
• Margin of safety below$155set from my bear case C (calculated)

I set the margin of safety from the bear case: at $155, my $117 bear value is at least three quarters of the price paid, and the price is 25% under my base value. Why the bear? Because the danger here is a downturn from a high base, and a plain discount to the base would not protect against that. At $155 my bear returns 8.9% a year and my base 12.5% E (estimate). The stock last closed below $155 on 3 April 2020.¹ At $443.88 the price is 186% above that level, so there is no margin of safety, and no cushion against my base either.

Two different questions

How good is the business, and how good is the price? They are separate questions. As a business Rockwell is strong on most tests I have: an 18.4% return on invested capital, a software margin above 33%, cash that nearly matches earnings over ten years, a modest debt load and a shrinking share count.²¹² Its flaws are the ones in my first list: it follows the capital-spending cycle, depends on two distributors for a fifth of sales, and is growing its recurring revenue more slowly than it planned. As for the price, the stock ended most fiscal years of the last decade at 24 to 28 times GAAP earnings, and it is at 34 times now C (calculated).¹¹²² So this looks like a good business at a poor price, which is a very different thing from a poor business at a poor price. It depends on whether the upturn is a new level. I cannot prove that part either way.

VIIThe case for the price

What most people miss

Three things cut in Rockwell’s favour and get little attention. First, software and control is 31% of sales and, on these figures, 46% of segment profit, with a margin up 4.6 points in nine months to 33.7% C (calculated).² The segment people argue about is the one that carries the company. Second, controller shipments are, according to management, only just back to pre-COVID unit volume, so a unit-volume upturn in the installed base is not yet in the numbers.³ I note that this is a third-party transcript and a company claim. Third, a Supreme Court ruling in February 2026 made tariffs paid under the IEEPA refundable. The company has filed claims and booked none of it, and the 10-Q does not give an amount.¹⁶

The bull case

In plain words: Rockwell is the leader in the plants that are being built, and it is only now starting to earn the margins its software can give. The people who make that case most plainly are the ones who run the company. In the August release Moret said the quarter was driven by “continued strength in semiconductor, data center, and warehouse automation,” and that the company continues to perform “at the high end of our growth framework.”² On the call, as the transcript has it, he said “we’re not hitting anything close to an asymptote,” and that data-centre demand “makes its own weather.”³ The numbers behind the story are on the Nasdaq consensus screen: $13.26 of earnings for fiscal 2026, $14.92 for 2027, $16.82 for 2028 and $18.42 for 2029, about 11% a year C (calculated).²⁵ I could not confirm a dated sell-side target from a primary source, so I attribute nothing to analysts.

Against reality

Much of that case is already in the numbers. Sales are up 10% and the margin is up 2.6 points, and my base follows that for two years.²³ So if Rockwell grows sales 6.5% a year for two years and keeps adding margin to 25%, my $206 base is possible, and if it grows 9% for two years and reaches 28%, my $275 bull is. The price is 115% above the base. To pay $443.88 an owner needs a discount rate near 8% on my bull case, which is the Treasury plus about three points, for a business with a 2024 behind it E (estimate).

It helps to multiply it out. My bull needs four things. Growth near 9% for two years and 7% or more through 2030: 50%. A margin of 27% or more by 2033: 40%. No downturn of 5% or more in ten years, in an industry that has had two since 2016: 40%. A required return of 8% or less at this price: 50%. Those are my guesses. Multiplied, they give 4% E (estimate). They overlap, so perhaps 8% in practice. My base needs less: sales growth of 5% or more for five years, a margin near 25%, and no deep downturn, say 60%, 50% and 40%, or about 12% before overlap E (estimate). The price needs more than my bull, so I cannot call it cheap even if my base is right.

What a 10x would take. Ten times $443.88 is $4,439, about $495B of market value on today’s shares. At 25 times earnings that needs about $20B of net income, more than thirteen times this year’s adjusted income of $1.48B. At a 17% net margin, above today’s 16%, that is about $117B of sales, thirteen times fiscal 2026, and about as much as all of the $120B market the 10-K says Rockwell can address C (calculated).⁵² By 2036 it needs 29% sales growth a year for ten years, from a company that has grown 4% a year over the last nine and 17% in its best year. Buying back 3% of the shares a year would cut those sums by about a quarter, and it would still take about $86B of sales. Rockwell’s own stock did 3.8 times in the last ten years, helped by a rise in the multiple from about 21 times fiscal 2016 GAAP earnings to 34 times C (calculated).¹¹² I know of no industrial automation company that has gone up tenfold from this size. For Rockwell, tenfold from here is close to impossible, and I would not build a case on it.

Where I come down

The software margin moved me: 33.7% on 17% growth is better than I expected from a company in this business, and it is why my base margin runs to 25%. The growth and the multiple did not move me, because the price already counts them in full. Recurring revenue is what I would watch most closely. A run of quarters with recurring revenue back near double digits would raise my values the most.

VIIIRisks, and what would change my view

The three ways this goes badly wrong are at the start of Valuation. These are the rest.

• The cycle. Customers can postpone plant spending quickly. In fiscal 2024 sales fell 8.8%, and in 2020 5%.¹² The current upturn rests on data centres, chips and warehouses, which are the markets that most depend on AI-related spending.³ If that pauses, the fall could be sharper than one that comes from a general slowdown.
• Two distributors. About a fifth of sales go through the two largest. Their stocking decisions can move Rockwell’s sales by more than end demand.⁵
• Costs. Memory-chip inflation is a double-digit-million headwind in the second half and the CFO does not expect it to ease soon. Tariffs are being passed on in price, and price is a swing factor for margin.³
• Recurring revenue. Growth is below the company’s own plan. If organic ARR stays near 6% or falls, the software story depends mostly on the Logix controller cycle.²¹⁶
• Capital plan. The $2B programme and the New Berlin plant raise capital spending to about 4% of sales in 2027, and the 10-K itself warns that benefits may be delayed or smaller.⁵³
• Legacy liabilities. The company is a defendant in asbestos cases for old components. It changed its accounting for the defence costs in 2025 and took a $136M charge, and it has insurance it believes will cover most future costs.⁴¹⁶ I cannot verify the insurance.
• People. The chief revenue officer is leaving at year end, the finance chief is two years in, and the CEO has served ten years and was 62 in the last 10-K.¹⁷⁵ A planned handover is normal, and it is also a risk to the sales organization that drives the distributor relationships.
• Competition and AI. Siemens’ software unit is far bigger and is growing ARR at nearly twice Rockwell’s rate.⁶ If control logic is written by AI tools that are less tied to one vendor, the cost of switching falls. I cannot tell how fast that changes.
• Valuation. A multiple of 34 times earnings leaves no room for a missed quarter. A 20% fall in the multiple with no change in earnings would take the price to about $355.