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Morgan Stanley analyst Joshua Pokrzywinski reiterated an Overweight rating on the shares of Rockwell Automation IncROK with a price target of $335.
For all the cyclical ambiguity reflected in macro caution and strong micro trends, the backdrop for automation spending and backlog cushion against a hard landing supports a bullish view on the company, said the analyst.
Furthermore, as sector earnings risk rises, ROK’s multiple is defensible with consensus earnings that still look too low in FY24 and FY25, the analyst added.
The analyst continues to view Rockwell’s markets and shares as well placed in the coverage universe based on the three factors.
First, major U.S. near-shoring and capex announcements amount to a ~4-5% uplift to U.S. manufacturing capex over the next 5 years based on the analyst’s name-by-name and sector-by-sector capex cost estimates.
Second, most multi-industry names have excess backlog right now, but ROK’s excess is significant, owing to structural change in customer behavior supported above and particularly challenged supply chain performance over the past year which only recently improved.
And the third factor, valuation, is debatable across the sector but the analyst believes most investors expect PMIs to trough sometime between mid-year and year-end 2023.
The analyst noted valuation is not as daunting as it seems and attractive for all but short-term investors.
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