管理層發言
Thank you for holding, and welcome to Rockwell Automation's Quarterly Conference Call. I need to remind everyone that today's conference call is being recorded. At this time, I would like to turn the call over to Aijana Zellner, Head of Investor Relations and Market Strategy. Ms. Zellner, please go ahead.
Thank you, Julianne. Good morning, and thank you for joining us for Rockwell Automation's Third Quarter Fiscal 2026 Earnings Release Conference Call. With me today is Blake Moret, our Chairman and CEO; and Christian Rothe, our CFO. Our results were released earlier this morning, and the press release and charts are available on our website. These materials as well as our remarks today will reference non-GAAP measures. Reconciliations of these non-GAAP measures are included in both the press release and charts. A replay of today's webcast and a transcript of our prepared remarks will be available on our website at the conclusion of today's call. Before we begin, please note that our comments today include forward-looking statements regarding the expected future results of our company. Our actual results may differ materially due to a wide range of risks and uncertainties described in our earnings release and SEC filings. So with that, I'll hand it over to Blake.
Thanks, Aijana, and good morning, everyone. Before we turn to our third quarter results on Slide 3, I'll make a couple of initial comments. We delivered a strong quarter with double-digit year-over-year growth in sales and earnings exceeding our expectations. This sustained momentum underscores Rockwell's strong position in North America and growing penetration in new end markets, an accelerated pace of new product introduction, our unmatched partner ecosystem and the team's disciplined execution. We continue to see strong demand across Semiconductor, Data Center, E-commerce & Warehouse Automation. While we are not yet seeing a pickup in CapEx across Food & Beverage and parts of process, we are seeing early signs of renewed project activity in Automotive and Life Sciences. Customers are increasingly turning to Rockwell's differentiated portfolio of hardware, software and services to adapt to changing market dynamics from GLP-1 related investments and evolving food and beverage demand to AI-driven data center growth and new opportunities across energy storage, defense and advanced manufacturing. I'm proud of how our team continues to execute amid geopolitical volatility, trade uncertainty and persistent inflation. The Rockwell Operating Model helps us drive operational excellence, serve customers and invest for the future. Those principles are on full display at our Singapore manufacturing facility, which was recently named the World Economic Forum Lighthouse for its leadership in digital and AI-enabled manufacturing. Turning to our third quarter results on Slide 3. Q3 sales came in above our expectations. Reported sales were up 8% and organic sales were up 10% with the impact of the Sensia dissolution decreasing sales by 3% and currency contributing about 1% of growth. Products continue to outperform our longer-cycle solutions business as smaller modernization projects across most industries drove the majority of our growth in the quarter. The verticals seeing the strongest capital investment, including Semiconductor, Data Center and E-com & Warehouse tend to be more heavily weighted toward our product and software offerings. Our Intelligent Devices organic sales grew 10% year-over-year with broad-based growth across all product lines. New offerings such as PointMax I/O, additional PowerFlex drives and FLEXLINE motor control centers are seeing strong adoption, particularly in E-commerce & Warehouse Automation and process industries. We also delivered double-digit growth in our Production Logistics business with strategic wins across Food & Beverage, Semiconductor and Life Sciences. Software & Control organic sales were up 18% versus prior year, driven by another quarter of strong double-digit growth in Logix. Lifecycle Services organic sales were down 2% versus prior year, generally in line with expectations. Book-to-bill in this segment was 0.97. While customer engagement remains healthy, growth in this segment continues to be constrained by the lack of capital spending recovery in Food & Beverage and certain process industries where many of our Lifecycle Services offerings are deployed. Organic annual recurring revenue grew 6% in the quarter, below our expectations. High single-digit software growth was partially offset by the slower growth in recurring Lifecycle Services. While services growth was softer than expected, we continue to add important ARR wins across our customer base. A great example is Unilever, which expanded its cybersecurity program to additional sites. The engagement combines our threat detection and secure remote access software with managed cybersecurity services to provide continuous monitoring, secure connectivity and protection of critical manufacturing operations. Enterprise operating margin of 22.3% and adjusted EPS of $3.49 were up double digits versus prior year, led by strong volume and favorable mix. Moving to Slide 4 for Q3 industry highlights. Our discrete sales grew high teens year-over-year, led by strong double-digit growth in Semiconductor, Data Center and E-com & Warehouse. Within discrete, Automotive sales were up low double digits versus prior year, marking another quarter of better-than-expected performance. Customers continue to prioritize investments in productivity, quality and asset utilization. While tariffs and geopolitical uncertainty continue to delay large greenfield projects, modernization spending remains strong. A great example is Convergix, a global system integrator who chose Rockwell's Emulate3D digital twin software to model a complex conveyance system. The solution is helping reduce project risk, accelerate commissioning and bring production online faster. Another notable win in Q3 was with a large automotive brand owner, where Rockwell's end-to-end automation portfolio was selected to improve operational efficiency and accelerate the launch of future vehicle programs across multiple global plants. E-commerce & Warehouse Automation sales were up 30% year-over-year with continued strong performance across regions and customer segments. Semiconductor delivered another strong quarter, driven by increased activity from several leading equipment manufacturers and chip makers, including continued investment tied to AI infrastructure. Data center remained a strong growth market in the quarter. Customers continue to invest in the power, cooling, automation and control systems required to support increasingly complex and energy-intensive facilities. This creates further opportunities across our hardware, software and services portfolio. Turning to our hybrid industries. Sales in this segment grew mid-single digits with good growth across all major verticals. Food & Beverage sales were up mid-single digits, led by growth in North America. While we have yet to see an inflection in large capital projects here, customers continue to invest in modernization and digital transformation initiatives across protein, dairy, fiber and nonalcoholic beverage applications. Sales in our Life Sciences vertical were up 10% in Q3 with broad-based growth across all regions and continued improvement at both machine builders and end users. In addition to favorable end market demand, we continue to expand our position through competitive wins. An important win in the quarter was with a leading pharmaceutical and biotech contract development and manufacturing organization who chose Rockwell's integrated process control and MES platform to standardize drug substance manufacturing across its operations. Moving to process. Our sales here were up high single digits, led by growth in Energy, Metals and Chemicals. Energy sales were up high single digits in the quarter with customer spending focused on brownfield expansions, asset modernization and production optimization. We also continue to see healthy activity across LNG, midstream, power infrastructure and offshore markets, supported by rising energy demand and the ongoing build-out of power capacity for data center and electrification. Mining sales were down mid-single digits, reflecting measured capital deployment across the industry and some project timing delays, specifically in Latin America. With that said, customers continue to invest in productivity, autonomy and digital transformation as demand for critical minerals continues to grow. Moving to Slide 5 for our Q3 organic regional sales. Similar to last quarter, we saw good year-over-year growth across most of our regions. North America was our strongest region in the quarter with 12% year-over-year growth, and we continue to expect it to be our fastest-growing region for the full year fiscal 2026. Let's now turn to Slide 6 to review our fiscal 2026 outlook. With 3 quarters behind us, customer investment is broadening across more of our end markets. While we have yet to see a broad-based recovery in large capital projects, we are confident Rockwell is best positioned to capitalize as spending accelerates. In the meantime, we'll continue to operate with discipline and prudence in what remains a very dynamic environment. We now expect both our reported and organic sales growth to be in the 7.5% to 9.5% range for the year. At the midpoint, reported sales growth includes approximately 150 basis points of favorable currency translation, offset by the impact of the Sensia dissolution. Our full year sales midpoint of 8.5% assumes modest sequential growth in Q4 driven by the typical seasonal uptick in our longer-cycle businesses within Lifecycle Services and Intelligent Devices. We expect organic annual recurring revenue to grow mid-single digits. We continue to expect our enterprise operating margin to be 21.5%, up 260 basis points from last year. And we now expect our adjusted EPS to be $13.15 at the midpoint, representing about 25% growth versus fiscal 2025. Finally, we continue to expect free cash flow conversion of 100% in fiscal year '26. I'll now turn it over to Christian for more detail on our Q3 and financial outlook for fiscal '26. Christian?
Thank you, Blake, and good morning, everyone. Let's go to Slide 7, third quarter key financial information. As Blake mentioned, our third quarter organic sales were up 10% versus prior year. Price contributed approximately 1% to growth. Our enterprise operating margin expanded 280 basis points year-over-year, driven by higher sales volume and favorable mix, partially offset by negative price/cost. As expected, the dissolution of Sensia had a positive impact of about 40 basis points on enterprise operating margin. Gross margins expanded 70 basis points year-over-year to 49.5%, driven by higher volume, favorable mix and a margin benefit from the Sensia dissolution. The Sensia dissolution was effective on April 1 of this year and as expected, was completed smoothly and on schedule. Excluding the year-over-year impact of the divested businesses in Q3, gross margins expanded slightly year-over-year. SG&A was up less than 1%, giving us solid P&L leverage on our baseline spending and engineering and development increased 5% as sales growth was faster than our engineering and development spend. However, E&D still represented about 8% of sales in the third quarter. We continue to expect E&D to be about 8% of sales for the full year. Our adjusted effective tax rate in the quarter was 19.2%, slightly lower than our expectations. We continue to expect an adjusted ETR of 19.5% for the full year. The broadening strength in our business that Blake highlighted drove another quarter of outperformance with Q3 adjusted EPS of $3.49, up more than 20% year-over-year. Free cash flow in Q3 of $654 million was above our expectations. It was $165 million higher than the prior year, primarily due to higher pretax income driven by our strong Q3 results and good working capital management. Now on to Slide 8 for the sales and margin performance of our 3 operating segments. Intelligent Devices margin of 20% increased by 120 basis points year-over-year, lower than we expected. The higher year-over-year sales, favorable currency and mix were partially offset by inflation. Year-over-year segment incrementals landed at 30%. Software & Control margin of 34.8% was up 320 basis points versus prior year and was higher than our expectations, driven by strong sales volume, partially offset by inflation. This segment saw year-over-year incrementals of about 50%. Lifecycle Services margin of 15.1% was up 180 basis points year-over-year, in line with expectations. Lifecycle Services had another quarter of good project execution and productivity and segment margin benefited from the dissolution of Sensia. These were partially offset by lower sales volume. Total Rockwell incremental margin was in the high 50s year-over-year in Q3 on an as-reported basis and over 40% on an organic basis. This is our fourth consecutive quarter of incrementals above 40%. Let's move to the next slide, 9, for the adjusted EPS walk from Q3 fiscal 2025 to Q3 fiscal 2026. Year-over-year, core performance had an impact of $0.65 in Q3. Our core performance was driven by volume, mix and productivity, partially offset by price/cost. Core price/cost was unfavorable in the quarter, reflecting rising costs and the timing of price increases. We implemented a price increase late in Q3 that will be realized in Q4. The team still delivered strong margins and healthy incremental conversion in the quarter, demonstrating the strength of our operating model. We continue to expect positive price/cost both for the full year and in Q4. Tax was a $0.20 headwind, largely due to BEPS Pillar Two. All other items had a $0.09 positive impact on our adjusted EPS. Moving on to the next slide, 10, to discuss our guidance for the full year. We are increasing both our reported and organic revenue guidance to a range of 7.5% to 9.5% or 8.5% at the midpoint. This is up 150 basis points from our prior guidance. This increase reflects the outperformance we saw in the quarter and higher growth expectations for Q4. Our third quarter results and full year guide do not include any impact from expected IEEPA refunds or claims resulting from the Supreme Court decision. Turning to Slide 11. We are increasing our adjusted EPS guidance range to $13 to $13.30. The new midpoint of $13.15 per share is up $0.35 from the midpoint of our prior guide. For the full year, we still expect about 250 basis points of price realization with about 100 basis points from tariff-related pricing and about 150 basis points from underlying price. We remain on track for tariffs to be EPS neutral in fiscal 2026 with pricing offsetting the associated costs. This updated guide continues to reflect our expectations for full year incrementals of greater than 50% on an as-reported basis and high 40s on an organic basis. These strong incrementals are driving 260 basis points of expansion in enterprise operating margin year-over-year. Specific to the fourth quarter, we expect total company reported sales to be up low single digits sequentially with approximately flat enterprise operating margin compared to Q3. This is due to higher inflation and an unfavorable mix with configure-to-order and solutions sales hitting their normal seasonal peak. Intelligent Devices segment margin should be up slightly from the third quarter on modestly higher sequential volume. We expect segment margin in Software & Control to be lower sequentially on flat sales as inflation on items like memory hit here the hardest. For Lifecycle Services, we expect segment margin to be flat from the third quarter on higher seasonal sequential revenue. For the full year, we expect Intelligent Devices reported revenue to grow in the low double digits with segment operating margin of around 20%. For Software & Control, reported revenue should grow in the high teens with segment margin in the low 30s, up several hundred basis points year-over-year. For Lifecycle Services, we expect reported revenue to decline about $150 million year-over-year, driven by the Sensia dissolution and some of the ongoing longer-cycle headwinds Blake discussed. We still expect Lifecycle segment operating margin to be flat to slightly up year-over-year. For your models, CapEx for fiscal 2026 will come in at about 3% of sales. A few additional comments on fiscal 2026 guidance for your models. We expect Corporate and other expense to be around $115 million. Net interest expense for fiscal 2026 is targeted at about $120 million. During the quarter, we repurchased about 300,000 shares at a cost of about $150 million. We expect approximately $850 million in repurchases for the year. And we're now assuming average diluted shares outstanding of about 112.2 million shares. To summarize, while inflation remains a headwind, the Rockwell team has done a good job of managing through it by driving top line growth, securing component availability and mitigating cost pressure through pricing, productivity and disciplined spending. Combined with the core principles of the Rockwell operating model, these actions are driving double-digit year-over-year earnings growth and enterprise operating margin expansion of several hundred basis points year-over-year. Really proud of this team. With that, I'll turn it back to Blake for some closing remarks before we start Q&A. Blake?
Thanks, Christian. I'm pleased with our progress through the year with the fiscal year '26 top line guide at the higher end of our midterm growth framework and enterprise operating margin developing well. Customers are excited about the accelerated pace of new product launches, which is having a meaningful impact on our results. An Automation Fair is coming to Boston in November, where Rockwell and our partners will showcase even more offerings and innovation. Registration opens tomorrow. I continue to be proud of how our team is driving execution and customer service and how they're maximizing the impact of our investments on longer-term profitability and growth. Aijana will now begin the Q&A session.
Thanks, Blake. With that as a quick follow. Julianne, let's take our first question.
分析師問答
Our first question comes from Scott Davis from Melius Research.
Numbers look pretty solid overall. I got a little confused on the price comments. Maybe, Christian, you could help out a little bit. It seems like you guys have been running at about 1% of price positive. Now you're talking about getting, I think, another 1% and then another 1.5% on top of that for tariffs. Maybe I didn't hear that right. Just walk us through that, to check my math, and is this an 80/20 initiative that you're able to drive some incremental price? Are the tariff price increases actually separate and do they come off as soon as tariffs come up? Kind of how do you mechanically manage this?
Yes, sure, Scott. I appreciate the question. So we typically give a view on price for the full year at the outset of our guide for the beginning of the year, and then we kind of give updates as we go through. So we've always been calling out about 200 to 250 basis points of price for the full year 2026. 100 basis points of that is coming from tariff-based price, 150 basis points is coming from underlying price. In the third quarter, we started to lap some of the comps on tariff-based price. So the tariff-based price side was 1% and underlying price was close to 0. Now a lot of that has more to do with the timing of when our price increases have gone through. So we did an inflationary-based price change that happened in Q3. We're going to see that come through in the fourth quarter. That all is consistent with what we're expecting for the full year, that 250 basis points of total price. That tariff-based price, just to make sure we're on the same page around that — I know we talked about this message before — tariff-based pricing is really there to create EPS neutrality around tariff-based cost. And so it's not really all that incremental as far as the conversion goes. So I just wanted to note that for you.
Yes. No, that clears it up. And just quickly on Plex. I haven't heard you mention Plex in a while. Where are we on the deal model on that asset? And how are you guys feeling about it?
Yes, feeling good about Plex. Plex was part of the software ARR that was at the higher end, high single digits. Plex continues to add new logos, automotive tier suppliers, consumer, which — at the very beginning, that was one of the fundamental hypotheses: that we could use our existing market access to help Plex expand into consumer-packaged goods, and that's exactly what we've done. Very profitable, new functionality, the embedding of agentic AI throughout various of the modules works, and this is especially exciting to me personally, work to integrate Plex and the traditional MES with fleet management from our mobility, from mobile robots. And so you hear a lot going on about orchestration, and we've got a great head start by having a really fantastic cloud-native MES system with fleet management. So again, Plex is part of the software ARR that was up high single digits in the quarter.
Our next question comes from Andrew Obin from Bank of America.
Just maybe a broader, bigger picture question on inflation and pricing. As you look over the next 6 to 12 months, what's going to get better? Because labor costs probably aren't going down. I think the semiconductor supply chain is not going to get better. I think raw materials remain in flux. How do you adapt to this environment? Maybe your thoughts on inflation and what sort of structural countermeasures you can do, because it seems like you guys are going to be in this inflationary environment for a while.
Yes, Andrew, it's a good question. Inflation is a dynamic environment right now, starting with memory earlier this fiscal year for us, and it's continuing to expand. Data center demand is impacting a number of things, memory being the biggest one, but there are a number of other aspects that are coming with it. So first, the number one issue is to make sure we can ship product. That means making sure we have the components and good availability. The supply chain team has been on this all year long and has done a really good job of putting us in a good spot to continue to produce our product. That is not impacted. That being said, the cost side is a growing headwind. At the first quarter call, I talked about it being a single-digit millions headwind. Second quarter call, it was a double-digit million headwind. This call, it's still a double-digit million headwind for the second half, and it's a higher number than what we had last quarter. So it is increasing. That said, we are in a position that we can go and get price to offset that. We have productivity actions occurring inside the organization. We have other aspects that can work in our favor. Probably the biggest is that we are in a growing volume environment, which provides the opportunity to recapture areas where we think we have savings on direct material through negotiation with suppliers and other efforts. The team is doing a good job. As we think about next year, it's tough to know exactly what to expect with regard to inflation because it's not likely to stabilize anytime soon. But we will continue to react, try to get ahead with the supply chain to ensure product availability, and take pricing actions as appropriate.
Andrew, maybe a few additional comments. Structurally, we're able to take advantage of changes we incorporated during the supply chain shortages a few years back. That includes strong coordination with our channel partners because pricing for products largely goes through distribution. Moving to a fixed discount methodology for faster realization of price, more frequent price changes, and internally making progress on alternate sources of some material to introduce competition into the mix — those things are helping us well in the current environment.
And just a question on Lifecycle Services. I would have thought that as you're starting to see a pickup in organic growth, the installation business would pick up. Is it really driven mostly by these large CapEx projects that are still on the come? What's missing on services ARR?
Sure. We looked deeper at delays in projects to understand reasons customers are giving. Overall, it's a cautious approach to deploying capital. Customers are delaying things that are important but perhaps not urgent. We're seeing high levels of decision authority required to greenlight some projects. In some cases, there are funding constraints — that was a specific issue with capital projects in Latin America that we saw. Terms and conditions matter: in a volatile environment with tariffs and inflation, customers want to make sure the cost side of their business case is solid. In some cases, they're trying to find more certainty. It's a number of factors; some of the root causes for delayed CapEx are similar for lower ARR in services. Industry mix matters — Food & Beverage is an example where CapEx has been slower, and that impacts both CapEx projects and recurring services like cybersecurity.
Our next question comes from Andrew Kaplowitz from Citigroup.
Christian, last quarter you mentioned that book-to-bill was a bit over your normal range. Was that still the case in Q3? And would you say that you have more backlog coverage than usual going into Q4? Also, it seems like you're seeing some more unlock of larger CapEx projects now in markets such as Auto and Life Sciences. Why those markets? Maybe you could elaborate on the improvement you're seeing in those markets.
Yes. On the book-to-bill question, we called it out last quarter because it was just slightly above our normal corridor. For the first half, it was inside the corridor, and we expected for the remainder of the year it would be inside the corridor. Q3 was inside that corridor. So we feel fine about the development of our orders; it's consistent with sales. All in all, book-to-bill is in good shape.
Regarding Automotive and Life Sciences, we saw renewed strengthening. These aren't related to data center spend, which is encouraging because it shows broad-based demand. In Automotive, we are seeing green shoots of new projects; automakers previously paused while shifting from a surge in EV spending and now are balancing EV, hybrid and internal combustion demand. We've seen important competitive wins around standardization on Rockwell's architecture globally. In Life Sciences, it's a multiyear trend with marquee programs such as GLP-1 drugs driving automation need. Our MES had important competitive wins in drug substance. Those wins are sustainable growth vectors. Also, if you stripped out data center, our organic growth still would have been 8% in the quarter, which is a solid result.
Our next question comes from Chris Snyder from Morgan Stanley.
I was following up on earlier commentary that larger scale capital projects remain sluggish. Despite that, the company has generated very strong growth this year, almost 10%, with healthy orders driven by the short-cycle side. When you look at how the orders have developed or customer conversations into '27, how do you see these two sides of the business tracking? Do you think the short cycle can sustain the momentum? Do you think the large project business can show a positive rate of change? Any color would be helpful.
Let me give some general comments about trends into fiscal 2027. Tailwinds include broadening growth across verticals we’ve been discussing. I don't see reasons these should slow — it includes data center, semiconductor, E-com & Warehouse, Automotive, Life Sciences, etc. It's not just short cycle; process like Energy was up high single digits and contributing. The cycle is hard to pin down because COVID and supply chain shortages still reverberate and data center 'makes its own weather.' We expect data center to continue. We're pleased with renewed investments in Automotive and Life Sciences. Home & Personal Care in consumer packaged goods was good this quarter. Labor costs and shortages will continue to drive customer investment in automation; that happens durably when paired with trained workforces and technology. New product introductions continue to take share. Productivity actions and pricing will remain important as inflation persists. Geopolitical uncertainty and tariff volatility are risks, but we like our market position.
I appreciate that. Maybe a shorter-term question on Q4. You said margins flat sequentially. Typically margins step up with higher sequential volumes into Q4. This year, you're moving from price/cost negative in Q3 to positive in Q4, which I would think helps margins. Are there headwinds we should be aware of for the Q3 to Q4 margin progression?
Chris, yes. On the sequential side, we're expecting modest sequential growth driven by the solutions project configure-to-order side of the business. That will have a negative impact from a mix perspective. On top of that, inflation is continuing and will be a sequential drag. So while volume will be there, it's offset by mix and inflation, which is why we're expecting enterprise operating margin to be flattish sequentially.
Our next question comes from Jeff Sprague from Vertical Research Partners.
Could you put a finer point on what the price/cost headwind was in Q3 and specifically what you were expecting in Q4? And how should we think about how you're jumping off into 2027 from a price/cost basis based on that Q4 answer?
Jeff, price/cost was a headwind in Q3. We expect price/cost to be positive in Q4 year-over-year, but that's against rising inflation. I won't dimensionalize exact numbers in the quarter, but in Q3, core growth drivers were volume, then mix, with a small offset from price/cost negativity. In Q4, price/cost should be positive year-over-year. Sequentially we'll make progress with price coming in, but inflation will be higher sequentially.
Does that imply then that volume in Q4 is not as robust as what we saw in Q3, if I'm interpreting that correctly?
Think about it from a mix perspective. For example, Software & Control we're calling out flat sequentially. There will be some pricing sequentially, so volume is a tick less. At the same time, Software & Control should be up teens year-over-year and expand margins by nearly 200 basis points for the segment in Q4. Those are tough comps in Q4.
Our next question comes from Andrew Buscaglia from BNP Paribas.
On Software & Control margins, you've done a lot of work and margins are higher and organic growth has picked up, but you're running into tough comps in 2027 and a high bar for margins. I know you don't want to give 2027 guidance, but can you set us up for how you're thinking about Software & Control as we move into next year, given the high bar?
I'll make a few comments and Christian will add detail. We're only just now getting to and through the unit volumes of controllers we were at pre-COVID. There's been a lot of volatility over the last several years. We're going to exceed unit volume in Logix controllers, which drives much of Software & Control performance this year. We believe we are gaining market share in controllers. While we're pleased with growth and performance, which is driven by new designs, cost management and targeted investment, there's still plenty of opportunity. We're not near an asymptote where growth or profitability would stall.
Specific to Software & Control margins, the last two years generated a lot of expansion, predominantly driven by volume. Price has helped as well. Heading into 2027, memory cost and inflation will hit that business hardest. We've taken pricing actions and will continue to be dynamic. Getting margin expansion off price alone is very difficult when you're talking about that kind of inflation. Volume should help. It's early to give a precise view for 2027; we'll provide initial outlook next quarter. For 2026, we expect low 30s for total segment operating margin for Software & Control for the year and we have opportunity to build off that.
A second quick question: Automotive and Food & Beverage are large parts of your sales, but both indicated higher growth this quarter. How much of that is easier comps versus true demand picking up?
You should view that as a positive read on both demand and our offering. Automotive in the teens is a strong result; we've seen renewed project activity and important wins around the world. The biggest driver through the cycle is model changes, and we're seeing wins as automakers rebalance product portfolios. Food & Beverage is our single biggest vertical; even without big CapEx, we're seeing mid-single-digit growth. There's another gear available if CapEx recovers. Our domain expertise and offering position us well in these markets.
Our next question comes from Noah Kaye from Oppenheimer.
Could you level set on where we're at in the production logistics growth strategy? We're some time into the OTTO integration and you've launched more orchestration and production logistics offerings. It feels like increased wallet share capture is driving some outgrowth. Can you update us on integration and what the growth prospects look like?
I like our position in production logistics. In consumer packaged goods customers often add fixed automation on the make line but overlook material movement to and from the line. Production logistics addresses that. Independent cart technology plays a role. We're having a good year with iTRAK and MagneMotion. Autonomous mobile robots will see another year of strong double-digit growth. We continue to improve profitability and expect Clearpath to be profitable in the fourth quarter. Beyond consumer, you see opportunities in semiconductor for wafer transport, Life Sciences, etc. We have the portfolio to address this across multiple industries and are ensuring commercial coverage for the customers most interested in it. We're early in the growth opportunity and continue to build it out.
Follow-up on CapEx trajectory: CapEx is about 3% of sales this year. You previously talked about potentially stepping up to 4% in coming years and about the $2 billion of investments. Should we prepare for that step-up next year?
We expect to spend more CapEx next year than this year and still expect to be around 4% of sales. We have greenfield projects such as New Berlin, Wisconsin that will ramp through '27 into '28. Importantly, ROIC has recovered nicely, so even with higher investment we feel the trajectory is good. We expect strong ROI from both legacy investments and future investments that will be accretive to the organization.
Julianne, we'll take one more question.
Our last question today will come from Joe Ritchie from Goldman Sachs.
A lot covered today. I have one question around Software & Control margins in Q4. By my math, you're forecasting Q4 S&C margins to be below 30%, but that seems off. Can you help bridge the sequential decline from Q3 to Q4?
No, we're not looking at it to be in the 20s in Q4. We're looking at it to be in the low 30s, probably closer to 33-ish, which is about the average for the full year. Sequentially, inflation comes in against flat sales for Software & Control, and that's how the math comes together.
That concludes today's conference call. Thank you for joining us today.
At this time, you may disconnect.