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ABB's Q3 Earnings Surpass Estimates, Increase Y/Y, Orders Grow

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ABB Ltd. (ABB - Free Report) reported decent third-quarter 2021 results, wherein both earnings and revenues increased on a year-over-year basis.

Adjusted earnings came in at 37 cents per share, beating the Zacks Consensus Estimate of 34 cents. The bottom line recorded an increase of 76.2% on a year-over-year basis.

Top-Line Details

ABB’s third-quarter revenues totaled $7,028 million, up 7% from the year-ago quarter. The upside can be attributed to revenue growth across all of its segments. On a comparable basis, revenues grew 4%.

Total orders were $7,866 million, increasing 29% year over year. The metric increased 26% on a comparable basis, supported by a strong level of demand across its businesses. Exiting the third quarter, the company’s order backlog was $16,012 million, up 15.4% year over year.

Segmental Details

ABB reports revenues under four segments as discussed below:

Electrification: Revenues totaled $3,196 million, increasing 5% year over year. Orders were up 19% year over year to $3,519 million driven by strength across data centers, residential and non-residential buildings, food & beverage, rail and e-mobility industries.

Process Automation: Revenues were $1,507 million, increasing 7% year over year. Orders increased 43% to $1,670 million. Orders strongly improved in both products and service business, backed by strength across the process-related markets.

Motion: Revenues amounted to $1,673 million, up 4% from the year-ago quarter. Orders increased 24% to $1,909 million on account of strength across the short-cycle business.

Robotics & Discrete Automation: Revenues were $813 million, increasing 1% year over year. Orders grew 30% to $935 million. Orders improved across machine automation, general industry as well as consumer and service robotic segments industries.

ABB Ltd Price, Consensus and EPS Surprise

ABB Ltd Price, Consensus and EPS Surprise

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

Operational EBITA Margin

In the reported quarter, ABB’s total cost of sales decreased 0.3% year over year to $4,734 million. It represented 67.4% of third-quarter revenues compared with 72.1% a year ago. Gross margin was 32.6%, up from 27.9%. Selling, general and administrative expenses increased 3.3% to $1,231 million.

Operational earnings before interest, taxes and amortization (EBITA) in the quarter increased 35% to $1,062 million. Operational EBITA margin increased 310 basis points to 15.1%.

Balance Sheet and Cash Flow

Exiting third-quarter 2021, ABB had cash and cash equivalents of $3,709 million, up from $2,860 million recorded in the previous quarter. Long-term debt was $4,270 million, lower than $4,375 million at the end of the previous quarter.

In the first nine months of 2021, net cash provided by operating activities totaled $2,305 million compared with $650 million provided in a year-ago period.

In the first nine months of 2021, it paid dividends worth $1,726 million compared with $1,736 million paid in the year-ago period. In the same period, it purchased treasury stock worth $2,441 million compared with $1,270 million in the year-ago period.

Outlook

For the fourth quarter of 2021, ABB expects supply chain challenges to adversely impact its customer deliveries. The company expects end markets like oil and gas, buildings, mining & metals, automotive, marine & ports, renewables and food and beverage to witness solid growth. Also, recovery in power distribution utilities end market is likely to support its near-term results. However, weakness in the conventional power generation end market is likely to be a spoilsport.

For the fourth quarter, it anticipates sequentially stable revenue (comparable basis) growth. It expects the Operational EBITA margin to decline in the fourth quarter from the third quarter.

For 2021, the company predicts revenues (comparable basis) to grow 6-8% on a year-over-year basis.

Zacks Rank & Stocks to Consider

The company currently sports a Zacks Rank #4 (Sell).

Some better-ranked stocks from the Zacks Industrial Products sector are AZZ Inc. (AZZ - Free Report) , Brady Corporation (BRC - Free Report) , and Johnson Controls International plc (JCI - Free Report) . While AZZ currently sports a Zacks Rank #1 (Strong Buy), Brady and Johnson Controls carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

AZZ delivered an earnings surprise of 25.47%, on average, in the trailing four quarters.

Brady delivered an earnings surprise of 2.49%, on average, in the trailing four quarters.

Johnson Controls delivered an earnings surprise of 4.43%, on average, in the trailing four quarters.


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