For 25 years, American manufacturing quietly hollowed out. Factory jobs moved overseas. And industrial machinery orders fell nearly 50% in real terms after China joined the World Trade Organization. The logic behind it? Go where labor is cheapest. That logic is now running in reverse.
The bank’s message is that the US manufacturing capex cycle is not a trade war blip. It is the beginning of a decades-long structural shift. And the 123-year-old Rockwell Automation, the most widely deployed automation technology in US manufacturing, sits directly in its path.
Rockwell CEO Blake Moret delivered the earnings results that set the stage. “We delivered a strong second quarter, with double-digit growth in sales and earnings exceeding our expectations,” Moret said. “We saw solid momentum across warehouse automation, data center, semiconductor, and energy.”
Morgan Stanley’s response was a price target raise and a phrase that stands out in a market full of cautious language: “Still early.”
Morgan Stanley raised Rockwell Automation’s target to $525 from $460
Morgan Stanley raised its price target on Rockwell Automation (NYSE: ROK) to $525 from $460 in a note shared with TheStreet, maintaining its Overweight rating. The core of Morgan Stanley’s bull case is not a single earnings beat. It is a structural argument about where global manufacturing investment is heading.
MS outlined what it calls a $10 trillion US reshoring thesis. The premise is straightforward: as the cost gap between US and international manufacturing narrows, the next wave of global factory investment lands in America. Two forces are driving the narrowing.
Near term, tariffs are raising import costs while domestic incentives reduce production costs. Long term, automation technology is allowing US manufacturers to replace expensive human labor with electricity-powered processes – a trade that benefits the US specifically because American labor costs are high and electricity costs are relatively low.
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My read of this framework suggests Rockwell is positioned as something closer to infrastructure than a traditional industrial company. It is not just selling to factories. It is selling the technology layer that makes American factories economically viable in a world where labor arbitrage no longer delivers the advantage it once did.
US industrial machinery orders, which fell nearly 50% in real terms over the 25 years following China’s WTO entry, have now rallied approximately 50% since what Morgan Stanley calls “Liberation Day,” according to the firm’s analysis.
But the bank is explicit that this is the beginning, not the peak. Leading-edge demand is still tracking below 1990s levels. Decades of outsourcing have created significant pent-up investment.
Rockwell’s Q2 2026 results showed the reshoring thesis is already showing up in the numbers
The second quarter results Rockwell reported gave Morgan Stanley’s thesis its most concrete validation yet.
Rockwell’s fiscal Q2 2026 earnings results:
- Reported sales growth of 12% year over year
- Organic sales grew 9% year over year
- Adjusted EPS of $3.30 came in 32% above the prior year
Source: Rockwell Automation Second Quarter 2026 Results
Rockwell (ROK) raised its fiscal 2026 EPS guidance by 8% to $11.88 – $12.48, following the quarter, lifting the adjusted EPS range to $12.50-$13.10. That is the ninth consecutive EPS beat by an average of low double digits, according to Morgan Stanley’s note shared with me at TheStreet.
I crunched the numbers on the order trajectory, and the picture becomes even more compelling forward. Q2 orders of approximately $2.5 billion annualize to roughly $10 billion and would imply low double-digit growth in fiscal 2027 off the current $8.9 billion fiscal 2026 sales guide, according to Morgan Stanley’s analysis.
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Management signaled there was no meaningful pull-forward in Q2, suggesting the momentum reflects genuine underlying demand rather than a one-quarter surge.
Morgan Stanley models fiscal 2026 EPS at $13.08, toward the high end of guidance, with mid single-digit organic growth and strong incrementals continuing through fiscal 2027 and 2028, according to the firm’s estimates.
The data center angle is the growth driver inside Rockwell that most investors haven’t priced in
There is a part of the Rockwell story that Morgan Stanley flags as underappreciated. And my review of the breakdown suggests it could become material faster than the market expects.
The data center was a low single-digit percentage of Rockwell’s fiscal 2025 revenue. In fiscal Q2 2026, the category grew more than 100% year over year. If that trajectory continues (100% growth in fiscal 2026 followed by 50% in fiscal 2027), the data center could account for a high single-digit percentage of Rockwell’s total revenue and contribute 200 to 300 basis points of organic growth, according to Morgan Stanley’s modeling.
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The reason is structural. Data centers are transitioning to more intensive industrial controls, specifically programmable logic controllers, known as PLCs or Logix systems.
Rockwell’s Logix platform carries approximately 60% incremental margins on premium gross margins, according to the firm’s understanding, meaning the data center is not just growing fast, it is growing at above-average profitability.
What the $525 price target means for investors
Morgan Stanley’s $525 target is based on approximately 32.5 times the firm’s blended fiscal 2027 and 2028 EPS estimate of $16.06. That multiple carries a roughly 60% premium to the S&P 500 and approximately 40% premium to industrial peers, according to the note.
The premium is justified, in Morgan Stanley’s view, by three things: upcycle inflection, an improved organic growth profile, and demonstrated margin execution. Rockwell has expanded its operating margins by approximately 400 basis points over the past two years.
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The Sensia joint venture dissolution, completed April 1, removes a margin-dilutive drag and provides roughly 20 basis points of tailwind in the second half.
For investors who have been watching the reshoring trade from the sidelines, Morgan Stanley’s message is that the entry point is still reasonable. The thesis is proven enough to trust. The cycle is early enough to matter.
