The 2017 earnings season is finally coming to a close, and all numbers point to a tremendous year of growth in robotics, automation, and artificial intelligence (RAAI). ROBO Global Robotics & Automation Index members—including a diverse mix of companies large and small across the RAAI supply chain—posted the strongest positive earnings surprise since the inception of the index, with 88% of index members beating consensus sales estimates. What’s more, the key trends driving the industry today point to continued robust growth to come.
Index Performance
At the median, ROBO index sales growth accelerated to 15%, up from 12% in the prior quarter. This is the strongest growth rate since 2011 when the global economy was recovering from the worst recession in decades. In contrast, today’s remarkable sales growth is not just the result of low hurdles. Expansion in robotics, automation and AI is increasingly broad-based—which is reflected in the fact that every of the 12 ROBO subsectors reported positive sales growth. The most impressive year over year gains were seen in:
The vast majority of the 88 ROBO index members finished the year on a very strong note, with just six companies experiencing revenue decline year over year. The strongest growers in the quarter included:
While median Earnings Per Share (EPS) growth slowed to 18% from 26% in the prior quarter, this was largely due to one-time losses related to the US Tax Cuts and Jobs Act that was signed into law at the end of 2017 and resulted in companies marking down deferred tax assets. Adjusting for these accounting losses, the ROBO Index remained on a clear 20%+ EPS growth trajectory. In fact, US tax reform is driving another round of upgrades in the earnings outlook across the robotics, automation, and AI universe, extending the series of beat and raises to a fifth consecutive quarter. As of March 8th, analysts’ estimates now point to another year of double-digit topline (+10%) and EPS (+17%) growth. These represent 300bps and 500bps upgrades from two months ago, respectively.
These strong financial results and outlooks continue to support gains within the ROBO Index, which is up 6% to date in 2018 following a 47% return in 2017.
Continuing Trends
As we move into 2018, indications are strong that robotics, automation, and AI is in for yet another stellar year.
For investors who are positioned to take advantage of this spectacular growth, the numbers and these impressive trends bring nothing but good news.
By Jeremie Capron
Head of Research, ROBO Global