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Here's Why You Should Retain ABB in Your Portfolio for Now
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ABB Ltd is benefiting from a stable demand environment and pricing actions. Portfolio restructuring actions bode well for the company’s growth. ABB’s commitment to rewarding shareholders through dividends and share buybacks holds promise.
This Zacks Rank #3 (Hold) company is benefiting from a healthy demand environment across most segments despite headwinds from supply chain disruptions, cost inflation and adverse foreign currency movements.
Stable demand across most customer segments and strength in the Flow business is aiding ABB’s Electrification segment. Continued volume recovery in both the short cycle and the systems-related business is driving the Motion segment’s performance. The acquisitions of PowerTech Converter and Siemens' low voltage NEMA motor business are expected to fortify the segment’s performance.
With easing component shortages, recovery in volumes within the Robotics & Discrete Automation unit should bolster ABB’s growth story. Robust customer activity in the marine & ports, mining, refining and renewables markets bodes well for the Process Automation segment. For the first quarter of 2023, ABB anticipates double-digit comparable revenue growth. For 2023, it expects comparable revenue growth to be more than 5%.
ABB is acquiring strategic businesses and simultaneously divesting non-core operations as part of its portfolio reshaping actions. The company’s acquisition of a majority stake in InCharge Energy (January 2022) enhanced its E-mobility business by expanding its customer base and boosting fleet electrification software and digital services offering in North America.
As for divestiture, in December 2022, the company sold its remaining 19.9% equity stake (80.1% of the stake was divested in 2020) in the Hitachi Energy joint venture to Hitachi, Ltd. ABB has realized a net positive cash inflow of approximately $1.425 billion in the fourth quarter of 2022 as part of the divestment. The divestment allows the company to focus more on key market trends and customer needs of electrification of transport and industry, automated manufacturing, digital solutions and increased sustainable productivity.
In October 2022, ABB completed the spin-off of its turbocharging unit, Accelleron. The spin-off helps the company focus on growing global megatrends in electrification and automation. ABB’s organic growth investments and diligent cost-control initiatives are expected to improve its competency over time.
ABB’s measures to handsomely reward its shareholders through dividends and share buybacks are encouraging. In April, the company launched a new share buyback program of up to $1 billion following the completion of the previous one. The program will run through the company’s 2024 annual general meeting. Under the previous program, launched in April 2022, ABB bought back 67.5 million shares for approximately $2 billion. In 2022, ABB paid out dividends worth $1,698 million.
A stable demand environment and shareholder-friendly policies primarily drove ABB’s shares up 33.3% in the past six months compared with the industry’s 12.6% increase.
Image Source: Zacks Investment Research
Key Picks
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Deere has an estimated earnings growth rate of 31% for the current fiscal year. The stock has gained around 5% in the past six months.
Ingersoll Rand (IR - Free Report) presently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 8.5%, on average.
Ingersoll Rand has an estimated earnings growth rate of 7% for the current year. The stock has rallied 23% in the past six months.
Illinois Tool Works (ITW - Free Report) currently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 0.9%, on average.
Illinois Tool has an estimated earnings growth rate of 4% in the past six months. The stock has gained 23.5% in the past six months.
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Here's Why You Should Retain ABB in Your Portfolio for Now
ABB Ltd is benefiting from a stable demand environment and pricing actions. Portfolio restructuring actions bode well for the company’s growth. ABB’s commitment to rewarding shareholders through dividends and share buybacks holds promise.
This Zacks Rank #3 (Hold) company is benefiting from a healthy demand environment across most segments despite headwinds from supply chain disruptions, cost inflation and adverse foreign currency movements.
Stable demand across most customer segments and strength in the Flow business is aiding ABB’s Electrification segment. Continued volume recovery in both the short cycle and the systems-related business is driving the Motion segment’s performance. The acquisitions of PowerTech Converter and Siemens' low voltage NEMA motor business are expected to fortify the segment’s performance.
With easing component shortages, recovery in volumes within the Robotics & Discrete Automation unit should bolster ABB’s growth story. Robust customer activity in the marine & ports, mining, refining and renewables markets bodes well for the Process Automation segment. For the first quarter of 2023, ABB anticipates double-digit comparable revenue growth. For 2023, it expects comparable revenue growth to be more than 5%.
ABB is acquiring strategic businesses and simultaneously divesting non-core operations as part of its portfolio reshaping actions. The company’s acquisition of a majority stake in InCharge Energy (January 2022) enhanced its E-mobility business by expanding its customer base and boosting fleet electrification software and digital services offering in North America.
As for divestiture, in December 2022, the company sold its remaining 19.9% equity stake (80.1% of the stake was divested in 2020) in the Hitachi Energy joint venture to Hitachi, Ltd. ABB has realized a net positive cash inflow of approximately $1.425 billion in the fourth quarter of 2022 as part of the divestment. The divestment allows the company to focus more on key market trends and customer needs of electrification of transport and industry, automated manufacturing, digital solutions and increased sustainable productivity.
In October 2022, ABB completed the spin-off of its turbocharging unit, Accelleron. The spin-off helps the company focus on growing global megatrends in electrification and automation. ABB’s organic growth investments and diligent cost-control initiatives are expected to improve its competency over time.
ABB’s measures to handsomely reward its shareholders through dividends and share buybacks are encouraging. In April, the company launched a new share buyback program of up to $1 billion following the completion of the previous one. The program will run through the company’s 2024 annual general meeting. Under the previous program, launched in April 2022, ABB bought back 67.5 million shares for approximately $2 billion. In 2022, ABB paid out dividends worth $1,698 million.
A stable demand environment and shareholder-friendly policies primarily drove ABB’s shares up 33.3% in the past six months compared with the industry’s 12.6% increase.
Image Source: Zacks Investment Research
Key Picks
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Deere & Company (DE - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 4.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Deere has an estimated earnings growth rate of 31% for the current fiscal year. The stock has gained around 5% in the past six months.
Ingersoll Rand (IR - Free Report) presently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 8.5%, on average.
Ingersoll Rand has an estimated earnings growth rate of 7% for the current year. The stock has rallied 23% in the past six months.
Illinois Tool Works (ITW - Free Report) currently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 0.9%, on average.
Illinois Tool has an estimated earnings growth rate of 4% in the past six months. The stock has gained 23.5% in the past six months.