ABB Stock Down On Weak Q3 Orders, Q4 Margin Warning

Swiss engineering company ABB Ltd. reported Wednesday significantly higher profit in its third quarter with strong revenue growth, while orders were weak. Going ahead, the company projects comparable revenue growth in the fourth quarter, but margin will be lower sequentially. The company further lifted its forecast for fiscal 2023.

In Switzerland, ABB shares were losing around 5 percent in the early morning trading.

Bjorn Rosengren, CEO, said, “Q3 2023 was a strong quarter for ABB including a positive book-to-bill ratio, Operational EBITA margin again above 17 percent and a strong cash flow delivery putting us in a good position to achieve an annual free cash flow of about $3 billion.”

For the fourth quarter, ABB anticipates low- to mid single digit comparable revenue growth. Additionally, historical pattern is expected to repeat with the Operational EBITA margin in the fourth quarter to be sequentially lower from third quarter, and to be around 16 percent.

Further for fiscal 2023, the company now anticipates comparable revenue growth to be in the low teens range and Operational EBITA margin to be in the range of 16.5 percent – 17.0 percent.

The company previously expected full-year comparable revenue growth to be at least 10 percent, and operational EBITA margin to be above 16 percent.

For the third quarter, net income attributable to the company climbed 145 percent $882 million from last year’s $360 million. Basic earnings per share were $0.48, up 149 percent from prior year’s $0.19.

Income from operations grew 78 percent from last year to $1.26 billion, and operational EBITA grew 13 percent to $1.39 billion. The company achieved an Operational EBITA margin of 17.4 percent, an improvement of 80 basis points from 16.6 percent last year.

Revenues grew 8 percent to $7.97 billion from last year’s $7.41 billion. On a comparable basis, revenues increased 11 percent.

Orders were $8.05 billion, down 2 percent from last year’s $8.19 billion. However, orders grew 2 percent on a comparable basis.

ABB noted that most customer segments remained overall stable or improved, with declines mainly noted in the discrete automation and construction segments.

Order growth was strongest in business area Process Automation, while order intake in Robotics & Discrete Automation was hampered by customers normalizing order patterns in a period of shortening delivery lead times.

Among regions, Americas was the growth engine for orders, driven by double-digit comparable growth in the United States and supported by the timing of large orders booked.

Asia, Middle East and Africa improved on a comparable basis mainly with growth in India, while orders in China declined at a low single-digit comparable growth rate particularly hampered by weakness in robotics and construction demand.

Europe declined in a low double-digit rate.

In Switzerland, ABB shares were trading at 30.74 Swiss francs, down 5.9 percent.

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