Fanuc Beaten Down On Sharp Order Declines

Japanese automation leader Fanuc (OTCPK:FANUY) (6954.T) has a loyal shareholder base that can lean toward the fanatical, but the last couple of quarters underline that for all of Fanuc’s quality, it’s not immune to macro-driven cyclicality. What’s worse, competition has ramped up in many of the company’s businesses and management’s projections that conditions won’t get significantly worse may prove too optimistic.

From where I sit, the argument that Fanuc is too cheap now only works if you expect a pretty dramatic reversal (basically a V-shaped recovery) in recent machine tool and automation demand trends in China and a quick return to double-digit ROEs. I don’t believe that’s going to happen, and I think Fanuc has more vulnerability to traditional rivals like ABB (ABB) and Yaskawa (OTCPK:YASKY), non-traditional rivals like Teradyne (TER) and local Chinese automation companies, and shifting market trends than its more bullish supporters acknowledge.

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Fanuc Beaten Down On Sharp Order Declines