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ABB Q3 Earnings Match Estimates, Revenues & Orders Decline Y/Y
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ABB Ltd. 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 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).
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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A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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ABB Q3 Earnings Match Estimates, Revenues & Orders Decline Y/Y
ABB Ltd. 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-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 - Free Report) , Rexnord Corporation and Plug Power, Inc. (PLUG - Free Report) , 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.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>