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ABB's Q4 Earnings and Revenues Decline Y/Y, Orders Down

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ABB Ltd. (ABB - Free Report) reported disappointing fourth-quarter 2019 results, wherein both earnings and revenues declined on a year-over-year basis.

Operational earnings were 27 cents per share, which fell 10% from the year-ago figure of 30 cents.

In 2019, the company’s operational earnings came in at $1.24 per share, down 6.8%.

Inside the Headlines

ABB’s fourth-quarter revenues totaled $7,068 million, down 4.4% 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 down 2%.

In 2019, ABB reported revenues of $27,978 million, up 1.1% on a year-over-year basis.

Total orders were $6,886 million, decreasing 1.4% year over year. The metric increased 1% on a comparable basis backed by strong orders in Electrification, Industrial Automation and Motion, largely offset by weakness in Robotics & Discrete Automation. Order backlog increased 2%.

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

ABB reports revenues under four segments as discussed below:

Electrification: Revenues totaled $3,238 million, decreasing 2% year over year. Orders were up 1% to $3,160 million owing to solid demand for solutions across the data center, utilities and electric transport sectors in AMEA region and Europe.

Industrial Automation: Revenues were $1,683 million, declining 2% year over year. Orders increased 4% to $1,706 million. The upside was owing to robust orders for specialty vessel in Europe and broad-based growth in China.

Motion: Revenues amounted to $1,657 million, down 1% from the year-ago quarter. Orders rose 4% to $1,602 million on account of robust orders for drive solutions in Europe.

Robotics & Discrete Automation: Revenues were $787 million, declining 12% year over year. Also, orders decreased 19% to $701 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 8.4% to $4,861 million. It represented 68.8% of fourth-quarter’s revenues compared with 71.8% a year ago. Gross margin was 31.2%, up from 28.2%. Selling, general and administrative expenses declined 6.4% to $1,365 million.

Operational earnings before interest, taxes and amortization (EBITA) in the quarter increased 21.6% to $710 million. Operational EBITA margin increased 220 basis points to 10.1%.

Balance Sheet and Cash Flow

Exiting the fourth quarter, ABB had cash and cash equivalents of $3,554 million, up from $3,445 million recorded in the year-ago quarter. Long-term debt was $6,772 million, higher than $6,587 million at the end of 2018.

In 2019, net cash provided from operating activities totaled $2,325 million against $2,924 million generated in the previous year.

Outlook

ABB believes that tough business conditions in Europe and the United States and geopolitical uncertainties might impact its near-term results. Also, foreign currency translation and oil prices might affect ABB. However, the resilient end markets will be beneficial to its near-term performance.

Zacks Rank & Key Picks

ABB currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the Zacks Industrial Productssector are SPX FLOW, Inc. (FLOW - Free Report) , Berry Global Group, Inc. (BERY - Free Report) and Barnes Group, Inc. (B - Free Report) . While SPX FLOW sports a Zacks Rank #1 (Strong Buy), Berry Global and Barnes Group carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SPX FLOW pulled off positive earnings surprise of 6.95%, on average, in the trailing four quarters.

Berry Global delivered positive earnings surprise of 0.26%, on average, in the trailing four quarters.

Barnes Group pulled off positive earnings surprise of 4.21%, on average,in the trailing four quarters.

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