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ABB to Gain From Strength in End Markets Amid Headwinds
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ABB Ltd. has been benefiting from strength in its end markets, including oil and gas, mining & metals, automotive, marine & ports, renewables, food and beverage and power distribution utilities. The company is expected to continue gaining from growth across short-cycle businesses and improvement in service and process-related businesses in the quarters ahead. Also, solid orders and a strong backlog level bode well. At the end of 2021, its order backlog was $16,607 million, reflecting year-over-year growth of 16%.
The company believes in strengthening its businesses through addition of assets. Its acquisition of a majority stake in InCharge Energy (January 2022) is expected to enhance its E-mobility business by expanding its customer base and boosting its fleet electrification software and digital services offering in North America. Also, the buyout of Codian Robotics B.V. (October 2020) has expanded the technological expertise and product portfolio of ABB’s Robotics & Discrete Automation segment.
It is committed to rewarding shareholders through share-repurchase programs and dividend payouts. In 2021, the company paid out dividends worth $1,726 million to shareholders. In April 2021, it introduced a share repurchase program, through which it intends to repurchase shares worth up to $3 billion. This buyback program is expected to remain operational till the company’s 2023 Annual General Meeting.
However, ABB has been dealing with escalating costs and expenses over time. In 2021, its cost of sales increased 6.7% year over year, while selling, general and administrative expenses rose 5.5%. Also, its high capital expenditures might negatively impact its profitability in the quarters ahead. For 2022, it expects to incur capital expenditures of $750 million, with $140 million expected to have been incurred in the first quarter.
The company has been facing challenges related to the supply chain, logistics and availability of labor. In 2021, ABB’s top line was adversely impacted by supply chain constraints due to delays in customer deliveries. These issues are likely to continue affecting its performance in the near term.
Image Source: Zacks Investment Research
In the past six months, this Zacks Rank #3 (Hold) stock has lost 7.7% compared with the industry’s decline of 4.9%.
Key Picks
Some better-ranked stocks from the Zacks Industrial Products sector are discussed below.
In the past 30 days, Franklin Electric’s earnings estimates have been stable for 2022. FELE’s shares have lost 3.5% in the past six months.
AGCO Corporation (AGCO - Free Report) presently sports a Zacks Rank #1. Its earnings surprise in the last four quarters was 56.65%.
In the past 30 days, AGCO’s earnings estimates have decreased 0.3% for 2022. AGCO’s shares have jumped 9.6% in the past six months.
Ferguson plc (FERG - Free Report) presently carries a Zacks Rank #2 (Buy). Its earnings surprise in the last reported quarter was 11.56%.
In the past 30 days, Ferguson’s earnings estimates have increased 6.5% for fiscal 2022 (ending July 2022). FERG’s shares have lost 9.3% in the past six months.
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ABB to Gain From Strength in End Markets Amid Headwinds
ABB Ltd. has been benefiting from strength in its end markets, including oil and gas, mining & metals, automotive, marine & ports, renewables, food and beverage and power distribution utilities. The company is expected to continue gaining from growth across short-cycle businesses and improvement in service and process-related businesses in the quarters ahead. Also, solid orders and a strong backlog level bode well. At the end of 2021, its order backlog was $16,607 million, reflecting year-over-year growth of 16%.
The company believes in strengthening its businesses through addition of assets. Its acquisition of a majority stake in InCharge Energy (January 2022) is expected to enhance its E-mobility business by expanding its customer base and boosting its fleet electrification software and digital services offering in North America. Also, the buyout of Codian Robotics B.V. (October 2020) has expanded the technological expertise and product portfolio of ABB’s Robotics & Discrete Automation segment.
It is committed to rewarding shareholders through share-repurchase programs and dividend payouts. In 2021, the company paid out dividends worth $1,726 million to shareholders. In April 2021, it introduced a share repurchase program, through which it intends to repurchase shares worth up to $3 billion. This buyback program is expected to remain operational till the company’s 2023 Annual General Meeting.
However, ABB has been dealing with escalating costs and expenses over time. In 2021, its cost of sales increased 6.7% year over year, while selling, general and administrative expenses rose 5.5%. Also, its high capital expenditures might negatively impact its profitability in the quarters ahead. For 2022, it expects to incur capital expenditures of $750 million, with $140 million expected to have been incurred in the first quarter.
The company has been facing challenges related to the supply chain, logistics and availability of labor. In 2021, ABB’s top line was adversely impacted by supply chain constraints due to delays in customer deliveries. These issues are likely to continue affecting its performance in the near term.
Image Source: Zacks Investment Research
In the past six months, this Zacks Rank #3 (Hold) stock has lost 7.7% compared with the industry’s decline of 4.9%.
Key Picks
Some better-ranked stocks from the Zacks Industrial Products sector are discussed below.
Franklin Electric Co., Inc. (FELE - Free Report) presently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise in the last four quarters was 17.4%, on average.
In the past 30 days, Franklin Electric’s earnings estimates have been stable for 2022. FELE’s shares have lost 3.5% in the past six months.
AGCO Corporation (AGCO - Free Report) presently sports a Zacks Rank #1. Its earnings surprise in the last four quarters was 56.65%.
In the past 30 days, AGCO’s earnings estimates have decreased 0.3% for 2022. AGCO’s shares have jumped 9.6% in the past six months.
Ferguson plc (FERG - Free Report) presently carries a Zacks Rank #2 (Buy). Its earnings surprise in the last reported quarter was 11.56%.
In the past 30 days, Ferguson’s earnings estimates have increased 6.5% for fiscal 2022 (ending July 2022). FERG’s shares have lost 9.3% in the past six months.