Infrastructure Earnings: ABB, Encore, Littelfuse, Eaton

Earnings season continued and since we’ve covered lighting, switchgear but only a couple of infrastructure companies, we thought we’d touch on a few more:

ABB (T&B)

From the earnings call with a focus on ABB Electrification, T&B and the US market:

• To give a sense of scale, ABB, globally, in Q3, had sales of $8.7 billion, up 3%
• Electrification impacted by material cost increases in some of its business (continuation of what we’ve seen with other companies which bodes for price increases to distribution in Q1 … and maybe an opportunity for profit improvement if pricing strategies are well managed)
• In US, total orders and base orders, across the business, grew by 3%.
• Electrification up 7% worldwide. US was a market mentioned as “positive in significant markets.”
• Talk about ABB Ability and Industrial Automation (clearly areas where the company is focused, along with digitization, (which may create interesting opportunities when eventually combined with GE Industrial Solutions.)
• ABB is a leader in EV charging.  (While still a nascent market, with vehicle sales growing and more auto companies offering, will become a greater opportunity. Question will be what will the sales channel be – residential, commercial, municipal?)
• Should not expect “major additional restructuring in the business to improve” but “will have the normal restructuring coming next year” (so, situation normal, expect some change, which may be a way to ensure no one feels comfortable)

And no input about the US market in general or the T&B product offering, which may be indication of where T&B fits given the overall size of ABB.

Encore

From their earnings call:

• Net sales dollars increased significantly (as expected, given copper price increases distributors have experienced)
  • Net sales were $292M vs $237.2M in 2016
• Higher copper raw material price and units have led to the growth.
  • Unit volume for 9 months up 5.6% in copper pound shipped
  • Margins increased
  • Average selling price of wire sold increased 25.7%
• US economy appears strong with a good outlook for construction projects for 2018
• “Super bullish” on copper looking into Q4 and Q1 2018 (this may help distributors in their planning process as it doesn’t sound like he expects copper pricing to crater, which would affect sales forecasting.)

Littelffuse

From it press release:

• Overall sales up 13%, 9% organically
• Electronics up 19% (11% organically)
• Industrial sales up 7%, 15% organically, with margin expansion (there was a divestiture.  Industrial is where the electrical business is from a reporting viewpoint.)
• Q4 outlook
  • “Expect continued top line growth across all businesses.
  • Expect total increase of 5%, 2% organically vs prior quarter

Eaton

Input from Eaton, (and a link to their slides) focusing on electrical and US,

• Overall, all divisions, 3.5% organic growth rate
• Mentioned “commodity cost headwinds” (raw material costs increased)
• Electrical Products group (make components and most of these components are circuit breakers, molded case circuit breakers
  • Revenues up 5% (4% organically))
    • Strength in Americas and industrial controls, commercial and resi products
    • Resi up high single digit
• Electrical Systems and Services (consider this Lighting, Bussman, Wiring Devices, B-Line, etc)
  • Revenues down 1% in quarter, -2% organically (with 1% positive for currency exchange)
    • Weakness in large assemblies in the US and in power quality
    • Signs of improvement in Crouse Hinds harsh & hazardous (improvement in oil / gas business)
    • Large projects up 13% in Q2
    • No mention of lighting’s performance
• North American Power Systems business has had low single digit growth
• 2018 overall Eaton outlook
  • Improving market conditions
  • Global growth
  • Expect about 3% market growth globally and all divisions … and expect Eaton to grow faster (good news is that this is on par with what we are hearing regarding electrical, so helps reaffirms that there isn’t expectations of a drop in sales)
• Dodge data indicates more large projects coming back
• Expect commercial projects to continue to grow
• Power systems – expect low single digit growth in 2018
• Crouse Hinds expected to have a “much better” 2018

And interestingly no comments regarding the lighting group / LEDs, which may lead one to believe that there isn’t anything / much to highlight.

No major revelations but trends include:

• Continued emphasis of raw material costs which infers Q1 price increases
• Some trending for 2018 of market growth of 3-4%
• Industrial, especially the oil & gas segment, experiencing growth
• Industrial automation market seeing growth
• Expected growth in large projects, although probably limited to metro markets
• Copper market to remain steady or perhaps grow with pricing steady or higher.