ABB Earnings May Disappoint on Large-Order Drought: Redburn
ABB Ltd. (ABBN), the world’s biggest manufacturer of power grids, may report second-quarter earnings below analysts’ estimates amid a dearth of big-ticket orders and higher-than-expected charges from the integration of an acquisition, Redburn Partners said in a note to investors.
ABB has booked about $300 million in large orders for transformers and industrial drives in the three months through June, compared with a two-year quarterly average of $1 billion, London-based analyst James Moore said.
Chief Executive Officer Joe Hogan’s organic growth targets are being squeezed by lower demand in China and Italy. Integrating the $3.9 billion Thomas & Betts, which became part of ABB in the second quarter, may cost $65 million more than expected, Moore said. This charge has not been announced by ABB, Moore said.
Large orders, which are worth more than $15 million each, were 23 percent of ABB’s total orders in the fourth quarter of 2011 and 14 percent in the first quarter of 2012. ABB’s announced order intake in the first half is down 25 percent year on year, according to data compiled by Bloomberg Industries.
ABB’s low-voltage unit saw no improvement in China and southern Europe as of May 31. More than half of the 40 analysts surveyed by Bloomberg have not updated their recommendations since mid-May, potentially leaving the consensus figure too inflated.
Track Record Threatened
Hogan is budgeting for China’s slowdown to stabilize, though there’s been no improvement in the low-voltage market, division head Tarak Mehta said in a May 30 interview. His division is unlikely to reach the upper end of revenue targets, he said.
Power distribution equipment sales will continue to suffer because of a poor outlook for China construction, data from Bloomberg Industries show.
ABB is poised to report earnings before one-time items of $827 million, according to an estimate of 15 analysts, compared with 926 a year earlier. Revenue of $10 billion, compared with $9.7 billion a year earlier, according to 16 analyst estimates.
Missing profit estimates would dent ABB’s record of beating analysts’ predictions. The shortfall in profit versus consensus in the first quarter was only the second miss in a row since 2007.
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