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ABB Q2 Earnings Top Estimates & Revenues Miss, Orders Up Y/Y

Zacks Equity Research

ABB Ltd. ABB reported mixed second-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Operational earnings were 34 cents per share, which beat the consensus estimate of 26 cents by 30.8%. However, the bottom line fell 10.5% from the year-ago figure of 38 cents.

Inside the Headlines

ABB’s second-quarter revenues totaled $7,171 million, up 7% from the year-ago quarter. The upside can be attributed to impressive growth at the Electrification and Motion segments. On a comparable basis, the revenues grew 2%. The top line missed the consensus estimate of $7,335 million.

ABB Ltd Price, Consensus and EPS Surprise

ABB Ltd Price, Consensus and EPS Surprise

ABB Ltd price-consensus-eps-surprise-chart | ABB Ltd Quote

Total orders were $7,401 million, increasing 4% year over year. The metric also improved 1% on a comparable basis, backed by growth across the United States and stable orders in Europe. The order backlog at the quarter end increased 7%.

Segmental Details

Notably, ABB reports revenues under the segments discussed below:

Electrification: Revenues at this segment totaled $3,272 million, increasing 22% year over year. Orders were up 5% to $3,339 million owing to solid demand for solutions across key end markets.

Industrial Automation: Revenues were $1,580 million, declining 2% year over year. Also, orders fell 4% to $1,622 million. The decline was owing to fall in large orders, particularly in Europe and Middle East regions.

Motion: Revenues at this segment amounted to $1,641 million, which increased 1% from the year-ago quarter. Orders of this segment rose 4% to $1,762 million backed by growth in larger orders for traction equipment.

Robotics & Discrete Automation: Revenues were $845 million, declining 9% year over year. Also, orders decreased 9% to $883 million. The decline was owing to softness in automotive and machine builders markets.

Operational EBITA Margin

In the reported quarter, ABB’s total cost of sales increased 7.6% to $4,871 million. It represented 67.9% of second-quarter’s revenues compared with 67.3% in the year-ago quarter. Gross margin was 32.1%, down from 32.7%. Selling, general and administrative expenses jumped 16.3% to $1,429 million.

Operational earnings before interest, taxes and amortization (EBITA) in the quarter under review decreased 3.5% to $825 million. Operational EBITA margin declined 120 basis points to 11.5%.

Balance Sheet and Cash Flow

Exiting second quarter, ABB had cash and cash equivalents of $2,512 million, down from $3,283 million recorded in the year-ago quarter. Long-term debt was $7,913 million, higher than $6,587 million recorded at the end of 2018.

In the first six months of 2019, net cash used from operating activities totaled $256 million against $492 million generated in the comparable year-ago period.

Outlook

Over the long haul, ABB believes that strengthening business in China and favorable operating conditions in the United States will provide a boost to its near-term performance. However, foreign currency translation and oil prices might affect ABB.

Zacks Rank & Stocks to Consider

ABB currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are DXP Enterprises, Inc. DXPE, AptarGroup, Inc. ATR and Avery Dennison Corporation AVY. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DXP Enterprises delivered average earnings surprise of 48.47% in the trailing four quarters.

AptarGroup pulled off average positive earnings surprise of 8.27% in the trailing four quarters.

Avery Dennison outpaced estimates in the last reported quarter by 1.10%.

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