Investing.com -- Morgan Stanley expects Rockwell Automation to benefit from sustained US factory automation demand when it reports second-quarter earnings this week. The firm points to multi-decade tailwinds from US reshoring trends as positive factors for the company's third-quarter results and beyond.

Morgan Stanley analyst notes that while some areas of the US short-cycle economy could see moderation in the third quarter, US factory automation is not expected to be among them. The firm maintains that US capital expenditure remains the most durable source of strength across US industrials.

Second-quarter results from US multi-industry companies have broadly exceeded conservative guidance. The market has penalized companies where second-quarter strength came at the expense of second-half performance, while favoring those showing positive momentum into 2027.

Eaton reported machinery original equipment manufacturer orders jumped 35% in the second quarter, while Regal Rexnord's sensors into industrial manufacturing accelerated to 11% growth in the same period. This contrasts with relative demand softness on the consumer side and across international markets.

Leading indicators show bifurcation under the surface of macro data. Data center and industrial automation sectors show clear improvement, with Delta Electronics monthly sales data accelerating through June. US industrial machinery and process machinery order rates are tracking at decade-high levels.

Morgan Stanley favors Rockwell Automation over Emerson Electric, citing greater confidence in the duration of US factory automation demand. The firm sees scope for a multi-decade upcycle based on US reshoring trends. Process machinery strength tied to oil and gas and metals and mining sectors carries more transient risk linked to the US-Iran conflict outcome.