ABB’s quiet transformation continues.
The engineering giant is starting to deliver on its promise
Lee Samaha (ABB): Along with much of the industrial sector, ABB’s stock got hit in 2022 on fears of an economic slowdown and ongoing pressure on costs coming from the supply chain crisis. Throw in concerns over the European company’s exposure to its home region (around a third of sales went to Europe in the third quarter) as a result of sanctions applied on energy from Russia – industrial companies in Europe face soaring energy costs as a consequence.
While those fears are justified, it’s important to note that ABB hasn’t seen any significant signs of a slowdown. Indeed, excluding the impact of currency and divestitures, its orders were up a whopping 16% in the third quarter. Moreover, CEO Bjorn Rosengren affirmed the company was on target for full-year operational earnings before interest, taxation, and amortization (EBITA) of 15% in 2022 – a year ahead of target. The margin performance attests to the success of Rosengren’s turnaround strategy at ABB. A once lumbering industrial giant with a host of exciting businesses in areas like robotics, motion control, automation, and electrification, is finally starting to realize its latent potential.
In recent years Rosengren restructured the company’s business model and aggressively divested or sold off or spun off non-core businesses (including the recent spin-off of its turbocharger business Accelleron) to focus ABB on electrification and automation – two exciting trends in the economy. As such, ABB’s long-term growth prospects look excellent, and its 2.8% dividend yield is compelling for investors who like to earn income while they wait for the growth potential in their stock to be realized.
