Jefferies: ABB results "mixed" but focus is on missing order targets

(Alliance News) - Jefferies reiterated its 'hold' rating for ABB Ltd, after it said its mixed fourth quarter reslts will show "more support for the bears than the bulls."

ABB shares were down 3.0% at CHF31.02 on Thursday afternoon in Zurich. In the year-to-date the stock is up 7.9%.

Jefferies rates ABB at 'hold' with a target price of 25.00p.

In the fourth quarter of 2022, the Zurich-based industrial conglomerate said revenue rose 3.3% to USD7.82 billion from USD7.57 billion a year earlier.

Net profit attributable to ABB, however, declined dramatically by 57% to USD1.13 billion from USD2.64 billion. Basic earnings per share dropped halved to USD0.60 from USD1.34.

ABB noted that "the last year period included the book gain on the divestment of the Mechanical Power Transmission division".

Orders during the quarter were down 7.7% to USD7.62 billion from USD8.26 billion, "with a favourable development in most of the process-related segments, while certain parts of the short-cycle business declined as customers normalize order patterns," ABB explained.

The company said orders remained stable or increased in three out of four business areas.

Jefferies said: "The market will likely focus on the order miss in the most cyclical business Robotics & DA ... Most Cap Goods companies have run very high WC to sales ratios into the last quarter of calendar '22 and ABB disappoints here."

For all of 2022, revenue amounted to USD29.4 billion, up 2% from USD29.0 billion the year before. Orders stood at USD34.0 billion, up 7% from USD31.9 billion.

Operational earnings before interest, tax, depreciation and amortisation for the fourth quarter amounted to USD1.15 million, up 16% from USD988 million a year ago, with a margin of 14.8%. For all of 2022, operational Ebita margin was 15.3%.

Net profit attributable to ABB fell 46% to USD2.48 billion from USD4.55 billion a year earlier, and basic earnings per share decreased by 43% to USD1.30 from USD2.27.

Jefferies noted that whist ABB's order target was missed 1%, its revenue was beat by 3% and Ebitda was in line with expectations.

However, Jefferies reiterated that the "key standout" is a 12% order miss for the company's Robotics & Discrete Automation arm. It added that order intake declined in all regions at a double-digit rate.

Looking ahead, ABB said it expects double-digit comparable revenue growth to support" some improvement in the operational Ebitda margin year-on-year in the first quarter of 2023. For the full-year, it expects comparable revenue growth to be above 5%.

Chief Executive Officer Bjorn Rosengren said: "2022 was another successful year for ABB, including a further streamlining of our business portfolio and achieving our margin target earlier than expected. We have made ABB more resilient. In 2023, regardless of current market uncertainty, we want to show that we can continuously deliver an operational Ebitda margin of at least 15%."

By Sophie Rose, Alliance News reporter

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