.September 6, 2024 Friday 12:41 PM

Morgan Stanley analysts have initiated coverage on Rockwell Automation (NYSE:ROK) with an Overweight rating and a price target of $320, citing a strong risk-reward opportunity. They see potential in the company despite its shares hitting a multi-year low, pointing to the ongoing momentum in U.S. reshoring efforts as a positive factor. The analysts estimate a $10 trillion opportunity for the industrial automation sector over the long term.

Anticipating a significant rebound in Rockwell’s orders, analysts forecast a 30% year-over-year increase in the fourth quarter of 2024 and continued double-digit growth in fiscal 2025. This recovery could signal the end of a negative revision cycle and potentially drive a valuation uplift for the stock. Currently trading at a 20% premium to the S&P 500, there is room for a 4-5 turn re-rating.

With U.S. manufacturing Capex expected to increase after years of stagnation, analysts believe Rockwell is well-positioned to benefit as the country attracts global investment. Manufacturing project starts are at 2.5 times pre-Covid levels, and automation spending offers better returns due to higher wages. The recent de-rating of Rockwell’s stock is seen as overdone, presenting a compelling investment opportunity according to the analysts.