ABB Ltd. (ABB - Analyst Report) outperformed the Zacks Consensus revenue and earnings estimates for the third quarter of 2010. The company reported revenues of $7.9 billion, ahead of the estimated $7.76 billion, while earnings per share were 34 cents, ahead of the estimated 31 cents.
Orders rose 18% and revenues increased 2% in local currencies, including an 11% increase in service revenues. This was due to a higher demand from industrial customers for energy efficient and capacity enhancing products. Demand increased across a gamut of industries, including metals and minerals, marine, pulp and paper, discrete manufacturing and renewable energy.
Orders were up 26% in Asia, primarily on higher base orders. Power Systems, followed by Process Automation and Discrete Automation and Motion contributed primarily to growth. Orders in local currencies were more than 50% higher in Europe compared with the same period in 2009. In the Americas, orders decreased 16%.
Revenues grew in the quarter on the back of strong growth in short-cycle automation businesses as recent orders were executed. Revenues in the longer-cycle businesses were flat to lower, reflecting the decline in orders received during 2009 and 2010. Service revenues increased 11% year over year.
EBIT and EBIT margin were positively impacted by lower operating costs. The total benefits amount to approximately $350 million in the most recent quarter.
Net income in the quarter amounted to $774 million compared to approximately $1 billion in the same quarter a year ago, which included a positive net impact of $380 million from the adjustment of provisions.
Net cash at the end of the quarter was $5.3 billion compared to $5.9 billion at the end of the previous quarter. Cash from operations amounted to $1.4 billion while cash used in financing activities included a dividend payment of $1.1 billion. The company enhanced its stake in its Indian subsidiary from 52% to 75% during the quarter for $950 million.
Industrial customers continue to spend more on automation, power equipment and solutions to increase the energy efficiency and productivity of assets. For ABB’s late-cycle businesses, which comprise the majority of its portfolio and are driven by customer capital expenditure, the outlook remains mixed. Upgrades and expansions of existing power infrastructure are needed in all regions, including renewables and smart grids. This is reflected in a high level of tendering activity in the company’s Power Systems business.
The power and automation technologies provided by ABB Ltd. enable utility and industry customers to improve performance, while lowering environmental impact. The company has witnessed improving signs in late-cycle power, with some recent large contracts won in the third quarter.
Based in Zurich, Switzerland, ABB Ltd. is a power and automation technology company. The company operates in five segments: Power Products and Power Systems supply products and complete Transmission and Distribution (T&D) solutions to utility and industrial customers. Discrete Automation & Motion, Low-Voltage Products and Process Automation supply products, systems and solutions to customers across nearly all segments of the process and manufacturing industries, as well as specialist end markets, such as marine and utility.
ABB Ltd. has a Zacks #3 Rank (short-term Hold recommendation).