ABB intuitively avoids robot stocks and cuts Fanuc's earnings

ABB intuitively avoids robot stocks and cuts Fanuc’s earnings

The most recent earnings from Intuitive Surgical, ABB and Fanuc showed profit and margin challenges. Although the economic slowdown in China is likely to affect demand in the near term, the number of installations is expected to increase globally.

– Growth of industrial robot installations by 31% in 2021.

– Intuitive Surgical Prosthodontics reported to have grown 13% in the third quarter of 2022 to “meet procedure requirements.”

Global X Robotics and Artificial Intelligence ETF provides exposure to Intuitive Surgical, ABB, and Fanuc.

The long-term investment case for robots and how they will play a critical role in the future, whether it be in manufacturing, industrial applications or healthcare, has been key to attracting interest. ABB [ABB]And the Fanuc [6954.T] And the Intuitive surgery [ISRG].

According to Christopher Jannati, global head of research at WisdomTree, industrial robot installations are up 31% in 2021, with China accounting for 51% and Japan and the United States accounting for 22% and 14%, respectively.

There were 268,200 facilities in China last year, 62,000 of which were in the auto industry. “We know that electric vehicles and smart cities are a major focus in China, and clearly this can be part of this investment effort,” Janati wrote.

In the past month, investors have returned to robotics stocks. While ABB’s share price is down 15.6% year-to-date through November 14, it has risen 26% in the past month. Fanuc and Intuitive shares also fell by 13.2% and 15.6%, respectively, but rose by 2.3% and 26% over the same periods.

Profit and margin challenges

Earnings of the last three companies reflected the current headwinds. Despite recording an 11% year-over-year revenue increase in the third quarter of 2022, Intuitive Surgical reported that a strong US dollar, persistent supply chain issues and high inflation weighed on its earnings. Operating margin decreased 2% year-over-year and net income decreased 15% from $381 million in the third quarter of 2021 to $324 million.

Fanuc’s operating income rose just 0.8% year-over-year in the six months through the end of September and was less than its forecast of 2%. In its second-quarter earnings call, the company pinned the profit loss to “a sharp increase in parts pricing and transportation costs.”

The Swiss company ABB recorded an increase in revenue year-on-year by 18% on a comparative basis in the third quarter of 2022, to reach $ 7.4 billion, and income from operations decreased by 17%, to $ 708 million. However, operating profit margin rose to a record 16.6%, up from 15.1% in the year-ago quarter. The company said that the impact of inflation on materials, transportation and wages was offset by higher volumes and prices.

The demand for robots is growing

Fanuc warned during its second-quarter earnings call about this demand for factory automation robots used in manufacturing An apple [AAPL] iPhones are expected to drop “for the foreseeable future.” This is due to a combination of the economic slowdown in China and declining demand for smartphones. It cut its full-year operating profit forecast for the year ending March 2023 by 8.4% to 181.7 billion yen ($1.2 billion).

Despite this, the general outlook on the topic of bots seems to be strong. In light of its record operating margin in the third quarter, ABB expects to meet its 2023 target of an operating EBITDA margin of at least 15% by fiscal year end.

Meanwhile, Intuitive Surgical said its core business is benefiting from the “ongoing epidemiological impact” of surgeries that are constantly being delayed. The company saw fixtures grow 13% in the third quarter of 2022 “to meet procedure requirements” and surgeries performed by the Da Vinci robot increased 20%.

“Even in a tough economic environment that has seen stocks perform hard, we think it’s an exciting time to think about these big trends,” Janati writes on the subject of robots.

Focus on Money: Global X Robotics and Artificial Intelligence

Intuitive Surgical is currently the largest contract in the world Global X Robotics and Artificial Intelligence ETF [BOTZ]with a weight of 10.50%. ABB and Fanuc ranked third and fifth with weights of 9.42% and 7.68%, respectively. The fund is down 39.70% year-to-date, but is up 20.62% in the last month.

Intuitive surgery is also the highest decade in Global Robotics and Automation ETF [ROBO]with a weight of 2.18%. ABB weight 1.41%. The fund is down 30% year-to-date, but is up 19.48% in the last month.

The medical robot maker is the eighth largest iShares Robotics & AI Multisector Fund [IRBO]with a weight of 1.22%. Fanuc has a weight of 0.92%. The fund is down 36.90% year-to-date, but is up 13.49% in the last month.

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