Investors and analysts look for 2017 to be a big rebound year have had to dodge multiple buckets of cold water as companies have reported earnings in January and February. ABB (NYSE:ABB) is the latest entrant on a list that has included companies like Honeywell (NYSE:HON), 3M (NYSE:MMM), Siemens (OTCPK:SIEGY), and Emerson (NYSE:EMR) indicating that while 2017 will likely be better than 2016, it's not going to be a year where everything is back to normal and growth returns to a level at, or above, long-term expectations.
Even though ABB's fourth quarter report wasn't that bad, the market didn't like what it heard and particularly the notes of uncertainty from ABB's management. While ABB came in a little better than I'd expected (particularly with respect to free cash flow generation), this story is playing out more or less like I thought it would from an operational perspective. I continue to look for ABB to grow revenue and FCF at long-term rates of around 3% to 6%, supporting a fair value of around $25.
Although ABB has its issues (rising competition in power grids, exposure to more commoditized segments of discrete automation, relative weakness in areas like controls and software), it also has exposure to recoveries in emerging markets like China and eventual recoveries in multiple commodity-driven markets.
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Okay Results From ABB Not Enough When The Market Wants A 'V-Shaped' Recovery