) reported full year and fourth-quarter 2013 earnings per share
of 23 cents per share, a decline of 12.0% from the prior-year
figure of 26 cents. The quarterly results included the effect of
additional charges owing to stemming from certain projects in the
Power Systems (PS) division.
For 2013, ABB reported earnings of $1.21 per share, reflecting
an increase of 3% year over year.
Even amid the prevalent macroeconomic challenges, the company
continued to receive orders in key sectors across its footprint.
This bellwether in power and automation technologies also
benefited from the execution of its strong backlog and improved
demand from earlier-cycle projects.
Total Revenue & Orders
Total revenue in the quarter increased 4% year over year in
terms of local currency to $11.4 billion. The rise in revenues
was primarily driven by stronger growth in early-cycle businesses
and execution of the order backlog. In addition, service revenues
in the quarter were in line and represented 16% of total revenue.
The revenues fell short of the Zacks Consensus Estimate of $11.5
Order level in the quarter declined 4% in terms of local
currency to $10.0 billion, with a backlog of $26.0 million.
Orders in Europe grew on the back of a rise in the automotive and
transmission investments in Germany. This increase more than
offset the weakness in Eastern Europe and a decline in Nordic
region. In the Americas, the automation industry remained strong
with base orders in U.S. increasing in double digits. However,
the growth was partially offset by decline in large orders in the
US, Canada and Brazil. On the other hand, order growth in Asia
resulted from an increased demand in Australia, India and South
Korea. However, orders decreased in China due to a decrease in
the number of large orders. Orders in the Middle East and
Africa rose on the back of growing demand for power equipment as
well as upstream oil and gas facilities.
revenues were $3.0 billion, marking a rise of merely 1% in terms
of local currency. This was due to a modest execution of the
order backlog. The segment benefited from the increasing
industrial and power distribution demand while utilities
continued to make selective investments in power transmission.
However, the segment's order growth declined 6% to $2.6 million
in the quarter.
revenues were $2.3 billion, up 4% in terms of local currency.
Revenue growth was again driven by execution of the order
backlog. Orders in Power System fell 23% in local currency to
$1.8 billion. The division's strategic repositioning to increase
project selectivity and enhance margins was the primary reason
for lower orders in the quarter.
Discrete Automation & Motion
revenues were $2.7 billion, up 8% over the previous year's
revenues of $2.5 million. The rise was due to execution of the
order backlog and increased demand for early-cycle products.
Additionally, the Power-One acquisition completed in last July
contributed to growth in orders and revenues. Order level
increased 10% to $2.5 billion. Orders during the quarter were
driven mainly by continued investments in robotics equipment from
automotive and general industry as well as demand for products to
improve industrial productivity.
revenues were $2.0 billion, up 2% in terms of local currency. The
segment gained from the increased demand for early cycle projects
including circuit breakers, control products and wiring
accessories. However, a decline in later-cycle projects partially
offset this gain. Service orders and revenues grew more than
total orders and revenues for the division. Orders declined 2%
due to weak demand at its mining and power utilities sector.
revenues increased 3% in local currency to $2.3 billion. The
company's performance reflected a strong backlog execution in its
marine and mining businesses among others. However, the segment
was negatively impacted by the decline in orders from most of the
sectors excluding oil and gas. Order level decreased 7% in local
currency to $2.0 billion. The decline was due to fewer large
orders in the mining and marine sectors when compared with the
Income and Expenses
Income from operations declined to $0.8 billion from 0.9
billion in the prior year, while its operational earnings before
interest, taxes, depreciation and amortization (EBITDA) in the
quarter totaled $1.4 billion, up 3% year over year.
Balance Sheet and Cash Flow
In 2013, ABB reported cash flow from operations of $3.7
billion versus $3.8 billion in 2012. However, the net debt
decreased to $1.5 billion from $1.6 billion at the end of
ABB's free cash flow for 2013 was $2.6 billion, which included
$1 billion of capital expenditures. Notably, the company's
capital expenditure decreased 18% in a year.
ABB maintains a positive long-term outlook. The company aims
to improve its efficiency by focusing on cash flow generation,
cost containment and stabilizing its PS business in 2014.
Moreover, rising investments in grid upgrades and the tendency of
industries to spend more on automation solutions to increase
energy efficiency and productivity bode well for the company.
However, short-term uncertainties continue to linger with the
persisting macroeconomic volatility.
However, ABB has lowered its compound annual growth rate
(CAGR) for the plan period 2011-15, to be in the range of 4.0-5.0
percent compared to the previously expected 5.5-8.5 percent. The
decrease is due to the ongoing slump in the capital expenditures
and a sluggish Power Systems business. The company reaffirmed its
long-term outlook for conversion rate of free cash flow to be
more than 90% in the plan period.
Along with the earnings release, ABB also revealed its plan to
raise the dividend for 2013 by 3.0% to 0.70 Swiss francs per
At present, ABB has a Zacks Rank #3 (Hold). However, some
better-ranked stocks in the same sector include
Quanta Services, Inc.
). All of these have a Zacks Rank #2 (Buy).
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