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ABB's Earnings Outshine Estimates in Q4, Revenues Miss

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ABB Ltd. reported mixed fourth-quarter 2020 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues missed the same.

Operational earnings came in at 26 cents per share, beating the consensus estimate of 16 cents. However, the figure recorded a decline of 3.7% on a year-over-year basis.

In 2020, the company’s operational earnings were 98 cents per share, down 21%.

Top-Line Details

ABB’s fourth-quarter revenues totaled $7,182 million, up 2% from the year-ago quarter. The upside can be attributed to revenue growth across most of its segments. On a comparable basis, revenues were flat. Notably, the top line missed the consensus estimate of $7,276 million.

In 2020, the company’s revenues came in at $26,134 million, down 6.6% year over year.

Total orders were $7,003 million, increasing 2% year over year. The metric decreased 1% on a comparable basis due to lower orders across Europe and the Americas regions. Exiting the fourth quarter, the company’s order backlog was $14,303 million.

Segmental Details

ABB reports revenues under four segments as discussed below:

Electrification: Revenues totaled $3,356 million, increasing 4% year over year. Orders were down 3% year over year to $3,074 million due to weakness across chemicals, oil and gas and other process industries.

Industrial Automation: Revenues were $1,545 million, declining 8% year over year. Orders increased 12% to $1,918 million. Orders were strong across several industries like mining, water and wastewater.

Motion: Revenues amounted to $1,705 million, up 3% from the year-ago quarter. Orders fell 3% to $1,552 million on account of weak orders across oil & gas industry in Europe.

Robotics & Discrete Automation: Revenues were $801 million, increasing 2% year over year. However, orders were flat at $699 million. Orders were 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 3.6% year over year to $5,035 million. It represented 70.1% of fourth-quarter revenues compared with 68.7% a year ago. Gross margin was 29.9%, down from 31.2%. Selling, general and administrative expenses declined 6.9% to $1,271 million.

Operational earnings before interest, taxes and amortization (EBITA) in the quarter increased 16.2% to $825 million. Operational EBITA margin increased 140 basis points to 11.5%.

Balance Sheet and Cash Flow

Exiting 2020, ABB had cash and cash equivalents of $3,278 million, up from $3,178 million recorded in the previous quarter. Long-term debt was $4,828 million, lower than $6,319 million at the end of the previous quarter.

In 2020, net cash provided by operating activities totaled $1,693 million compared with $2,325 million generated in a year ago.

Outlook

ABB believes that weakness across the oil and gas, automotive, conventional power generation and marine end markets due to the coronavirus-led issues might affect its near-term results. However, end markets like buildings, data centers, distribution utilities, consumer electronics and food and beverage are expected to witness solid growth.

ABB Ltd Price, Consensus and EPS Surprise

ABB Ltd Price, Consensus and EPS Surprise

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

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks are Franklin Electric Co., Inc. (FELE - Free Report) , SPX FLOW, Inc. (FLOW - Free Report) and Danaher Corporation (DHR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Franklin Electric delivered a positive earnings surprise of 12.82%, on average, in the trailing four quarters.

SPX FLOW delivered a positive earnings surprise of 146.55%, on average, in the trailing four quarters.

Danaher delivered a positive earnings surprise of 19.86%, on average, in the trailing four quarters.

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