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ABB's Q3 Earnings and Revenues Decline Y/Y, Orders Down

Zacks Equity Research

ABB Ltd. ABB reported disappointing third-quarter 2019 results, wherein both earnings and revenues declined on a year-over-year basis.

Operational earnings were 33 cents per share, which fell 2.9% from the year-ago figure of 34 cents.

Inside the Headlines

ABB’s third-quarter revenues totaled $6,892 million, down 2.9% from the year-ago quarter. The downside can be attributed to decline at the Industrial Automation and Robotics & Discrete Automation segments. On a comparable basis, the revenues were flat. The top line beat the consensus estimate of $6,890 million.

Total orders were $6,688 million, decreasing 3% year over year. The metric also declined 1% on a comparable basis due to weak orders in Robotics & Discrete Automation, partially offset by moderate growth in Industrial Automation and Electrification and Motion. The order backlog decreased 3%.

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

Notably, ABB reports revenues under four segments as discussed below:

Electrification: Revenues totaled $3,161 million, decreasing 1% year over year. Orders were down 1% to $3,188 million owing to soft demand in China.

Industrial Automation: Revenues were $1,492 million, declining 3% year over year. Orders increased 1% to $1,438 million. The upside was owing to robust orders in Asia, Middle East and Africa (AMEA) and the Americas, along with strong demand from process industries including oil and gas.

Motion: Revenues amounted to $1,630 million, up 1% from the year-ago quarter. Orders fell 1% to $1,618 million on account of decline in orders in Americas.

Robotics & Discrete Automation: Revenues were $831 million, declining 6% year over year. Also, orders decreased 18% to $709 million. The decline was owing to softness in automotive and automotive-sector related markets.

Operational EBITA Margin

In the reported quarter, ABB’s total cost of sales decreased 5.3% to $4,702 million. It represented 68.2% of third-quarter’s revenues compared with 70% a year ago. Gross margin was 31.8%, up from 30%. Selling, general and administrative expenses declined 4.7% to $1,298 million.

Operational earnings before interest, taxes and amortization (EBITA) in the quarter decreased 1% to $806 million. Operational EBITA margin increased 20 basis points to 11.7%.

Balance Sheet and Cash Flow

Exiting the third quarter, ABB had cash and cash equivalents of $2,579 million, down from $2,604 million recorded in the year-ago quarter. Long-term debt was $7,800 million, higher than $6,587 million at the end of 2018.

In the first nine months of 2019, net cash provided from operating activities totaled $414 million against $1,057 million generated in the comparable year-ago period.

Outlook

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

Zacks Rank & Key Picks

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

Some better-ranked stocks in the same space are Cimpress N.V CMPR, Brady Corporation BRC and Dover Corporation DOV. While Cimpress sports a Zacks Rank #1 (Strong Buy), Brady and Dover carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cimpress’ earnings surprise in the last reported quarter was a positive 137.04%.

Brady delivered average positive earnings surprise of 9.68% in the trailing four quarters.

Dover pulled off average positive earnings surprise of 6.70% in the trailing four quarters.

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