ABB's wheels are still spinning, and the quarterly data is mixed

Create Date: 2024-8-30 12:03:23|Source: ABB

CFA Stephen Simpson concluded

Third-quarter results were uncertain, and while order growth was improving, revenue growth and margin improvement were not significant.

Demand for industrial electrical products appears to be healthy, but utility spending remains lackluster, factory automation may be slowing, and ABB appears to be underperforming when it comes to process automation.

If ABB can reach its potential, there will be significant growth, but this is not a small "if" given management's past performance.

Every investor has their "enough" view, and I'm working with ABB. Despite a beautiful and healthy environment for electrical and automation products in general, many markets and a strong market position, ABB has spent a lot of recent history with a fast future, pulling down the grid business, weak utility demand, and a series of ongoing restructuring and M&A integration plans. It's not fair to compare to companies like Honeywell, but ABB's investors haven't really been cheered for a while, and third-quarter results don't seem to really break that trend.

ABB's wheels are still spinning, and the quarterly data is mixed

Typically, there are good and bad quarterly figures

Looking back at the third-quarter results, ABB clearly didn't do well enough to make it a good quarter, but it wasn't a disaster either.

On an organic basis, revenue grew 3%, which is a false level for a broader multi-industry peer. To make matters worse, in my opinion, only one of these four areas is performing above average; While Eaton (ETN) accounted for only one weak segment of its overall growth in the third quarter, its other businesses performed strongly.

The grid was the worst performer, with revenues of just -2% in the same period last year (+1% in the biennium), as utility spending remained lackluster in a few areas such as renewables and smart grid products. Electrical products rose 3 percent, a disappointing performance relative to Eaton's overall electrical business performance and Schneider's growth of more than 7 to 8 percent. Industrial automation also grew by only 3 percent, which is really not good enough given the overall health market for control systems (e.g., Honeywell, Schneider, Emerson (EMR), and even Yokogawa) and the growing hybrid/process end market.

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