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ABB Ltd. ABB reported disappointing second-quarter 2020 results, wherein both earnings and revenues declined on a year-over-year basis.
Operational earnings were 22 cents per share, beating the Zacks Consensus Estimate of 11 cents. However, the figure recorded a decline of 35.3% on a year-over-year basis.
ABB’s second-quarter revenues totaled $6,154 million, down 14.2% from the year-ago quarter. The downside can be attributed to a revenue decline at all of its segments. On a comparable basis, revenues were down 10%.
Total orders were $6,054 million, decreasing 18% year over year. The metric decreased 14% on a comparable basis due to lower orders across Europe, the Americas, and Asia, Middle East and Africa (“AMEA”) regions. Order backlog decreased 1% on a year-over-year basis.
ABB Ltd Price, Consensus and EPS Surprise
ABB Ltd price-consensus-eps-surprise-chart | ABB Ltd Quote
ABB reports revenues under four segments as discussed below:
Electrification: Revenues totaled $2,764 million, decreasing 16% year over year. Orders were down 18% year over year to $2,737 million, owing to lower short-cycle demand in the buildings market as well as a material decline in the oil and gas renewables markets.
Industrial Automation: Revenues were $1,382 million, declining 13% year over year. Orders decreased 20% year over year to $1,305 million. The downside was owing to weakness across energy and process industries across all regions.
Motion: Revenues amounted to $1,583 million, down 4% from the year-ago quarter. Orders fell 10% year over year to $1,586 million on account of lower short-cycle demand across all regions, particularly in the Americas.
Robotics & Discrete Automation: Revenues were $629 million, declining 26% year over year. Also, orders decreased 28% to $638 million. The decline was owing to softness in automotive, general industry and machine builder-related markets.
Operational EBITA Margin
In the reported quarter, ABB’s total cost of sales decreased 14.5% year over year to $4,167 million. It represented 67.7% of second-quarter revenues compared with 67.9% a year ago. Gross margin was 32.3%, up from 32.1% in the year-ago quarter. Selling, general and administrative expenses declined 17.4% year over year to $1,180 million.
Operational earnings before interest, taxes and amortization (EBITA) in the quarter decreased 21% to $651 million. Operational EBITA margin decreased 90 basis points to 10.6%.
Balance Sheet and Cash Flow
Exiting the second quarter, ABB had cash and cash equivalents of $2,518 million, down from $5,971 million recorded in the previous quarter. Long-term debt was $6,237 million, lower than $6,772 million at the end of 2019.
In the first six months of 2020, net cash provided by the operating activities totaled $252 million compared with $166 million used in the year-ago comparable period.
ABB believes that weakness across the oil and gas, automotive, conventional power generation, marine, and buildings end markets, owing to the coronavirus outbreak-led issues, will adversely impact its near-term results. Also, foreign currency translation might affect the company. Notably, it anticipates a decline in orders and revenues for the third quarter on a year-over-year basis.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks are Altra Industrial Motion Corp. AIMC, Berry Global Group, Inc. BERY and Dover Corporation DOV. All the companies presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Altra Industrial delivered an earnings surprise of 9.78%, on average, in the trailing four quarters.
Berry Global delivered an earnings surprise of 6.63%, on average, in the trailing four quarters.
Dover delivered an earnings surprise of 7.13%, on average, in the trailing four quarters.
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