ABB's Q4 Earnings Beat On Strong Robotics & Motion Business
Zacks Investment Research | Feb 07, 2018 09:22PM ET
ABB Ltd. (NYSE:ABB) reported operational earnings per share of 33 cents for fourth-quarter 2017, flat year over year, as modest top-line growth was somewhat offset by elevated expenses. However, earnings trumped the Zacks Consensus Estimate of 25 cents by an impressive 32%.
For 2017, net income rose 17% year over year to $2,213 million, largely driven by lower transformation-related and restructuring-related expenses, and net gains realized from the business divestments. However, operational EPS came in 1% lower in constant currency at $1.25, compared to 2016.
Quarterly revenues were up 3% year over year at $9,280 million, but missed the Zacks Consensus Estimate of $9,398.3 million. Individually, revenues witnessed growth in just one of the four segments of the company, with growth in Robotics and Motion more than offsetting contraction in Power Grids. The Electrification Products and Industrial Automation segments remained mostly flat.
For 2017, revenues inched up 1% to $34,312 million, as gains in Electrification Products and Robotics and Motion more than offset the declines in Industrial Automation and Power Grids.
Quarterly Segment Details
Electrification Products (down 1% year over year to $2,696 million): Orders were up 10% year over year to $2,556 million, driven by strong demand across all regions and end markets. Data center, food and beverage and electric vehicle fast-charging solutions displayed particular strength.
Robotics and Motion (up 6% to $2,187 million): Sales grew steadily on solid demand trends in robotics and energy-efficient solutions, and strong execution of the order backlog.Orders of this segment moved up 6% year over year to $2,040 million on a year-over-year basis, backed by improved demand from process end markets, which was somewhat offset by a decline in large orders due to the timing of tender awards.
Industrial Automation (flat at $2,012 million): Orders reverted to the negative trend, declining 1% year over year to $1,796 million, owing to selective capital expenditure investments in mining and specialty vessels.
Power Grids (down 7% to $2,809 million): Lower order backlog, primarily in EPC, thwarted revenue growth. Orders continued the downward trend and declined 16% to $2,493 million, mainly due to the exceptionally large UHVDC order that was awarded in India in 2016.
Total orders were up 2% year over year at $8,478 million, but declined 3% on a comparable basis,as strong base order development was more than offset by the impact of lower large orders in Power Grids and Industrial Automation. Base orders grew 9% on a year-over-year basis, while large orders amounted to just 7% of the company’s total orders, in line with ABB’s strategy. The order backlog at the quarter end amounted to $22.4 billion (down 4% year over year).
On a geographic basis, demand was positive in the European countries, with moderate overall growth and good timing of large capital investments. Orders displayed sound growth in the Americas as well, fueledby elevated demand in construction and general industries, and improvement in process industries. The Americas grew 12% in total orders, driven by strong contribution from the United States, Canada and Brazil. The Asia, Middle East and Africa (AMEA) region witnessed a mixed performance, with positive base order development in India, South Korea and Australia, which were slightly offset by order declines in China.
Book-to-bill ratio at the end of the reported quarter was 0.91, down from 0.92 recorded in the comparable quarter a year ago.
Operational earnings before interest, taxes and amortization (“Operational EBITA”) in the quarter under review fell 7% year over year in comparable terms to $1,021 million. The figure benefited from the positive net savings effect, which was more than offset by commodity price escalation, negative impact from volume and investments in growth, and business transformation.
Operational EBITA margin also contracted 150 basis points to 10.9%, hurt by charges related to the EPC businesses.
ABB Ltd Price, Consensus and EPS Surprise
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