With companies in a wide range of industries coming out of recession-induced hibernation, major players in industrial automation and process controls are seeing strong recoveries. The latest in that line is Rockwell Automation (NYSE:ROK), which ended its fiscal year with very strong performance and reasonably encouraging guidance for the next 12 months.

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A Strong End to the Year
Rockwell reported overall revenue growth of 26% in its fiscal fourth quarter, and 7% sequential growth. Growth was relatively balanced across the two major segments - the architecture/software business saw 36% year-on-year growth and 4% sequential growth, while the control products and solutions segment posted 20% and 9% growth on an annual and sequential basis, respectively. Growth appeared to be broad-based across sectors, as food/beverage, pharmaceuticals and light machinery all did well and major automakers like Ford (NYSE:F) and General Motors resumed spending.

Rockwell also did well leveraging this revenue into profits. Overall segment operating income jumped 156%, led by a 248% jump in architecture/software, and segment markets nearly doubled. All in all, income from continuing operations more than tripled in the fourth quarter.

The Road Ahead
Like ABB (NYSE:ABB), Rockwell was relatively optimistic about the next 12 months, looking for growth that may reach the low teens, while acknowledging that the hyper-growth rebound is probably over. Still, with a significant position in discrete factory automation (behind Siemens (NYSE:SI)), Rockwell is likely to see plenty of business in areas like China where increasing labor costs are forcing companies to substitute labor with automation. (For more, see The Characteristics Of A Successful Company.)

As time goes on, Rockwell may be able to use some customer-friendly attributes to its advantage when competing for business against ABB, Siemens and Emerson Electric (NYSE:EMR). For instance, the company uses open source software platforms that can actually be used to modify existing rival installations without a total overhaul. What's more, the company tends to dive deep into the industries it services and tries to build real expertise that can help it better serve its customers.

The Bottom Line
Rockwell is a quality company and a logical holding for investors who want to play the ongoing industrial recovery. Unfortunately, the stock is not cheap and the gains seem relatively limited from this point. That is a familiar refrain these days, though, as other quality names like Danaher (NYSE:DHR), Eaton (NYSE:ETN), Dover (NYSE:DOV) have also had solid runs.

Industrials may not be the bargain bin for investors these days, but Rockwell at least merits a spot on a watch list - if the ups and downs of the business cycle (and the stock market) push this one down, it could be a good opportunistic buy. (For more, see The Value Investor's Handbook.)

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Tickers in this Article: ROK, ABB, EMR, SI, F, DHR, DOV

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