Rockwell Automation, Inc. Morgan Stanley's 14th Annual Laguna Conference

I think the tone is generally optimistic. To be sure, there is a lot of tailwind. There is a lot of headwinds, and I am sure we will talk about inflation and tariffs and so on. But the underlying tone from our customers is distinctly positive. Our home market, North America, is the best place to be investing now. To be sure, we are enjoying some of the growth from data center. But in our traditional served end markets as well, we are seeing a generally positive demeanor. Within each of those industries, there is end market-specific activities going on as well. As we move across discrete, hybrid, and process end markets.

In discrete, we saw low double-digit growth the last quarter from automotive, which is about 10% of our total business. We are still not seeing a wholesale release of CapEx, but we are seeing some major projects here and there. We are certainly seeing a lot of modernization. Discrete is where data center is found, e-commerce, warehouse automation. The parcel handling companies are spending a lot of money to get the right balance between labor and technology. In hybrid food and beverage, we are seeing decent growth, again, primarily centered around modernizations. Home and personal care, high single-digit growth in the last quarter. Life sciences, about 10% growth in Q3. That is one of the areas that we are seeing some early examples of reshoring, or shoring, as I like to call it. Energy markets. When oil prices are high, when oil prices are low, efficiency is still an important part of the agenda for the oil and gas companies.

Mining and chemical, I think, show some signs of progress.

Tessa? Yeah. I think across the board, we're seeing good progress across industries, and operational efficiency and driving productivity in plants is always a top priority for the customers that we serve, and that drives demand for the products and services that we have.

Yeah, I think about a year ago, there were some conversations we heard from two different types of industrial companies, one in automotive and another one in parcel handling, where they had gotten through discussions with their labor unions, and they immediately went to a place of how can we get additional automation, again, to strike the right balance there? So at 4.1%, 4.2% unemployment, a lot of key jobs in manufacturing are going unfilled, and so having the right amount of technology for the scarce resources that these manufacturers do have is really important to give them the superpowers to get as much productivity as possible per person who is working in these facilities. That's been a consistent theme across really all of our served markets. I think in data center, just to go there for a minute, time to value is so important. Modularity. These things are looking like factories, as people have said, and so our technology is being increasingly adopted there, and we're seeing some nice wins in an industry that previously was not as big a contributor.

Yeah, I think a reduction in the uncertainty. As there is a lot of active headline-grabbing trade discussions going on. I was in Washington yesterday, and it is a very active moment, certainly for the U.S.'s most important trading partners here with Canada and Mexico. A reduction in the volatility there, particularly in industries like automotive, where the supply chains are so integrated across those three countries, I think that would release more capital.

We are most highly correlated over time to industrial production. We certainly look at the PMI rates, and those have been positive for a while now, over 50. But industrial production is what Rockwell's business traditionally has been most highly correlated to. I certainly look at that. I look at unemployment, because I think with such low unemployment in our home market, demand remains intact. A little bit harder to quantify, but progress of, let us say, USMCA 232, Section 232s are in some ways even more important right now. But watching the progress of that, those are some of the things I am looking at particularly.

I'd like to see us take a pragmatic approach with the targeted application of tariffs, not the wholesale, one-size-fits-all type of approach. Let's focus on the main issues, which is non-market behavior by non-market economies that are doing disruptive things with overcapacity, but not a broad-based approach that hurts friend and foe alike, as well as U.S. manufacturers, for whom they have a very hard time finding domestic sources of critical inputs. If the main prize is to increase the amount of final assembly in the U.S., providing a clearer path for being able to get relief on inputs that are important for that final assembly, I think is an important area of focus for policymakers.