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ABB Q3 Earnings Match Estimates, Revenues & Orders Decline Y/Y

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·4 min read
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ABB Ltd. ABB reported disappointing third-quarter 2020 results, wherein both earnings and revenues declined on a year-over-year basis.

Operational earnings came in line with the Zacks Consensus Estimate of 21 cents per share. However, the figure recorded a decline of 36.4% on a year-over-year basis.

Top-Line Details

ABB’s third-quarter revenues totaled $6,582 million, down 4.5% from the year-ago quarter. The downside can be attributed to a revenue decline in all segments. On a comparable basis, revenues were down 4%.

Total orders were $6,109 million, decreasing 8.7% year over year. The metric decreased 8% on a comparable basis due to lower orders across Europe, the Americas, and Asia, the Middle East and Africa (“AMEA”) regions. Exiting the third quarter, the company’s order backlog was $13,878 million.

ABB Ltd Price, Consensus and EPS Surprise

ABB Ltd Price, Consensus and EPS Surprise
ABB Ltd Price, Consensus and EPS Surprise

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

Segmental Details

ABB reports revenues under four segments as discussed below:

Electrification: Revenues totaled $3,031 million, decreasing 4% year over year. Orders were down 7% year over year to $2,952 million due to low large orders and weak long-cycle demand as well as a material decline in the oil and gas renewables market.

Industrial Automation: Revenues were $1,403 million, declining 6% year over year. Orders decreased 19% year over year to $1,164 million. Orders were adversely impacted by a proposed settlement in South Africa with Eskom, with respect to the Kusile project. Also, the downside can be attributed to weakness in energy and marine sectors across all regions.

Motion: Revenues amounted to $1,611 million, down 1% from the year-ago quarter. Orders fell 5% year over year to $1,535 million on account of weak project and services activities across oil & gas sectors in the AMEA and Europe.

Robotics & Discrete Automation: Revenues were $806 million, declining 3% year over year. However, orders increased 2% to $720 million. The improvement in orders was backed by robotics investments in the 3C and automotive sectors, particularly in China.

Operational EBITA Margin

In the reported quarter, ABB’s total cost of sales increased 1% year over year to $4,748 million. It represented 72.1% of third-quarter revenues compared with 68.2% a year ago. Gross margin was 27.9%, down from 31.8% in the year-ago quarter. Selling, general and administrative expenses declined 8.2% year over year to $1,192 million.

Operational earnings before interest, taxes and amortization (EBITA) in the quarter decreased 2% to $787 million. Operational EBITA margin increased 30 basis points to 12%.

Balance Sheet and Cash Flow

Exiting the third quarter, ABB had cash and cash equivalents of $3,178 million, up from $2,518 million recorded in the previous quarter. Long-term debt was $6,319 million, higher than $6,237 million at the end of the previous quarter.

In the first nine months of 2020, net cash provided by operating activities totaled $511 million compared with $414 million generated in the year-ago comparable period.

Outlook

ABB believes that weakness across the oil and gas, automotive, conventional power generation, marine, buildings and automotive end markets due to the coronavirus-led issues will adversely impact its near-term results. However, end markets like electrical distribution, data centers, transport, food and beverage, and consumer electronics are expected to show resilience.

Notably, it anticipates growth rates for orders and revenues to remain challenged for the fourth quarter on a year-over-year basis.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the same space are Regal Beloit Corporation RBC, Rexnord Corporation RXN and Plug Power, Inc. PLUG, each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Regal Beloit delivered an earnings surprise of 18.91%, on average, in the trailing four quarters.

Rexnord delivered an earnings surprise of 15.99%, on average, in the trailing four quarters.

Plug Power delivered an earnings surprise of 3.34%, on average, in the trailing four quarters.

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