Jefferies analyst Andy Douglas has revised the price target for Rotork (RTOXF, Financial), lowering it from 440 GBp to 430 GBp while maintaining a Buy rating on the stock. The firm considers the company's first-quarter trading update to be strong, aligning with management's anticipated direction. Jefferies remains confident in Rotork’s fundamental strengths, describing them as undervalued. The company's outlook continues to be promising, supported by a robust balance sheet that positions it well for mergers, acquisitions, and stock repurchases.
RTOXF Key Business Developments
Release Date: March 11, 2025
- Revenue: Increased by 8.2% year on year on an OCC basis to 754 million pounds.
- Adjusted Operating Margin: Improved by 70 basis points to 23.6%, the highest level since 2014.
- Net Cash: Ended the period with 125 million pounds after spending 63 million pounds on dividends and 50 million pounds on share buybacks.
- Return on Capital Employed: Rose to over 37%, a 720 basis points improvement since 2021.
- Adjusted Earnings Per Share: Increased by 8.7% to 15.9p.
- Final Dividend: Proposed at 5p per share, taking the full year dividend to 7.75p, a 7.6% increase from the prior year.
- Orders Received: Totaled 744 million pounds, up 6.1% on an OCC basis.
- Cash Conversion: Maintained at 119%.
- Free Cash Flow: Positive at 120 million pounds, up 5.4% from the prior year.
- Oil and Gas Revenue Growth: Increased by 11.7% OCC, with EMEA and Asia Pacific regions showing strong double-digit growth.
- Water and Power Revenue Growth: Up 13.1% OCC, with the Americas being the fastest-growing region.
- CPI Revenue: Decreased by 1.1% OCC due to reduced nickel mining project activity.
- Adjusted Operating Profit: Increased by 8.5% to 178 million pounds.
- Shareholder Returns: 113 million pounds returned through dividends and share buybacks.
- Acquisition of NOAA: Announced for 44 million pounds, expected to generate sales of 17.5 million pounds in 2025 at a 20% EBITDA margin.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rotork PLC (RTOXF, Financial) achieved an 8.2% year-on-year revenue growth on an organic, constant currency basis, with significant contributions from the oil and gas, water, and power sectors.
- The company's adjusted operating margin increased by 70 basis points to 23.6%, the highest level since 2014, reflecting higher sales and solid operating leverage.
- Return on capital employed rose year on year to above 37%, showcasing Rotork PLC (RTOXF)'s efficient capital usage.
- The rebranded Rotork Service division performed strongly, growing faster than the group and contributing 23% to group revenues.
- The acquisition of NOAA, a South Korean electric actuator manufacturer, is expected to generate sales of 17.5 million pounds in 2025 at a 20% EBITDA margin, with potential for significant sales synergies.
Negative Points
- The CPI division's revenues were 1.1% lower year on year on an OCC basis due to reduced nickel mining project activity.
- The company faced a foreign exchange translation headwind of 24 million pounds, impacting reported revenue growth.
- The ERP system implementation costs increased from 17 million pounds to 30 million pounds, indicating a significant rise in expenses.
- The UK defined benefit pension scheme incurred a one-time non-cash settlement loss due to a buy-in policy.
- The effective tax rate increased by 70 basis points, largely driven by the increase in UK tax rates.
