Automation has become essential in today’s economy. Automation drives productivity, efficiency and quality and helps companies deal with economic challenges. AI-driven solutions such as autonomous robots and machine learning streamline processes, reduce costs, increase quality and reshape manufacturing.

To capitalize on this trend, investors should buy top automation stocks like Intuitive Surgical, Inc. (ISRG), Honeywell International Inc. (HON) and Rockwell Automation, Inc. (ROK) who are leading the future of manufacturing.

Automation is transforming healthcare, aerospace and manufacturing through developments in building systems, sustainable energy and digital solutions. By addressing labor shortages and allowing workers to focus on higher-skilled positions, automation reduces dependence on a shrinking workforce, making it a promising investment opportunity now and for the future.

The global automation-as-a-service market, estimated at USD 2.04 billion in 2024, is expected to reach USD 13.45 billion by 2034, with a CAGR of 20.75%. This growth highlights innovations in healthcare for improved patient experiences, cost savings and accurate diagnoses, as well as improvements in industrial robotics to increase efficiency, reduce labor requirements and improve worker safety.

Furthermore, with the Industry 4.0 automation revolution, the manufacturing sector is poised for gains in efficiency, productivity, faster time to market, cost savings, improved decision making and optimized supply chains. Reflecting this potential, the industrial machinery market is expected to grow at a CAGR of 7.5% between 2024 and 2032.

Given these trends, let’s assess the fundamentals of the above-mentioned automation stocks.

Intuitive Surgery, Inc. (ISRG)

ISRG develops, produces and sells products that help doctors and healthcare providers improve the quality of and access to minimally invasive care internationally. The company offers the da Vinci Surgical System and the Ion Endoluminal System.

In terms of the trailing twelve months’ interest-bearing FCF margin, ISRG’s 8.10% is 277.3% higher than the industry average of 2.15%. Similarly, its trailing twelve month capex/revenue of 15.69% is 386.5% higher than the industry average of 3.23%. Furthermore, its twelve-month EBIT margin of 26.24% is significantly higher than the industry average of 2.29%.

ISRG’s total revenues for the third quarter ended September 30, 2024 rose 17% year over year to $2.04 billion. Non-GAAP net income attributable to ISRG was $669.10 million, or $1.84 per share, up 27.7% and 26%, respectively, from the prior year quarter. Additionally, the company’s non-GAAP revenue from operations increased slightly year-over-year to $754.90 million.

Street expects ISRG’s earnings per share and revenue for the quarter ending December 31, 2024 to rise 9.5% and 14.1% year-over-year to $1.75 billion and $2.20 billion, respectively. It surpassed Street EPS estimates in each of the four subsequent quarters. The stock is up 88.1% over the past year, closing the last trading session at $524.28.

ISRG’s POWR Ratings reflect strong fundamentals. The POWR Ratings rate stocks based on 118 different factors, each with its own weighting.

It ranks #79 out of 138 stocks in the Medical Devices & Equipment industry. It has an A grade for Sentiment. Click here to view ISRG’s Growth, Value, Momentum, Stability and Quality ratings.

Honeywell International Inc. (HON)

HON is internationally involved in aerospace technologies, building automation, energy and sustainable solutions, and industrial automation companies. It operates in the Aerospace segment, the Honeywell Building Technologies segment, the Performance Materials and Technologies segment and the Safety and Productivity Solutions segment.

In terms of trailing twelve months EBIT margin, HON’s 20.89% is 104.3% higher than the industry average of 10.23%. Similarly, its trailing twelve month return on total assets of 7.73% is 46.9% higher than the industry average of 5.26%. Furthermore, the 12-month FCF margin at 10.07% is 54.5% higher than the industry average of 6.52%.

In the third quarter ended September 30, 2024, HON’s net sales increased 8.5% year over year to $9.73 billion. Similarly, segment profit grew 5.8% from last year’s value to $2.30 billion. HON’s adjusted earnings per share were $2.58, up 8.4% from the same period last year. Additionally, the company’s free cash flow was $1.72 billion, up 10.1% year over year.

For the quarter ending December 31, 2024, HON’s earnings per share and revenue are expected to rise 7% and 8.5% year-over-year to $2.78 billion and $10.24 billion, respectively. HON surpassed consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has risen 16.6% to close the last trading session at $217.50.

HON’s positive outlook is reflected in its POWR ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.

HON has a B grade for Momentum and Stability. It ranks #24 out of 79 stocks in the Industrial & Machinery industry with an A rating. Click here for additional ratings from HON for Growth, Value, Sentiment and Quality.

Rockwell Automation, Inc. (SKIRT)

ROK provides industrial automation and digital transformation solutions in North America, Europe, the Middle East, Africa, Asia Pacific and Latin America. The company operates in three segments: Intelligent Devices, Software & Control and Lifecycle Services. The solutions include hardware, software products and services.

On October 29, 2024, ROK announced the FactoryTalk DataMosaix App Builder, a low/no-code tool for creating industrial data visualizations and dashboards, integrated with FactoryTalk DataMosaix for seamless data management across cloud and on-premise platforms. This solution simplifies data access and reporting for improved productivity.

On October 15, 2024, ROK announced enhancements to its FactoryTalk Optix portfolio of DataReady smart machines, enhancing real-time insights, seamless data transfer and edge-to-cloud analytics for improved operational efficiency. This update provides users with advanced visualization, HMI and data exchange capabilities for various industrial applications.

In terms of trailing-twelve-month gross profit margin, ROK’s 39.83% is 25.5% higher than the industry average of 31.73%. The twelve-month EBITDA margin of 20.40% is 46.4% higher than the industry average of 13.94%. Similarly, the stock’s trailing-twelve-month EBIT margin of 17.07% is 66.9% higher than the industry average of 10.23%.

ROK’s total revenue for the third quarter ended September 30, 2024 was $2.04 billion. The company’s gross profit was $770.60 million. Additionally, adjusted net income and adjusted earnings per share were $281.90 million and $2.47, respectively.

Analysts expect ROK’s earnings per share and revenue for the quarter ending June 30, 2025 to rise 2.9% and 4.7% year-over-year to $2.79 and $2.15 billion, respectively. It surpassed Street EPS estimates in three of the last four quarters. Over the past three months, shares of ROK have risen 11.2% to close the last trading session at $277.09.

ROK’s POWR Ratings Reflect Robust Outlook. It ranks number 58 in the industrial and machinery industry. It has a B grade for momentum and quality. Click here to view ROK’s Growth, Value, Stability, and Sentiment ratings.

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ISRG shares were unchanged in after-hours trading on Friday. Year-to-date, ISRG is up 59.01%, versus the S&P 500 index’s 27.04% gain over the same period.

About the Author: Abhishek Bhuyan

Abhishek started his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More…

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