ABB’s (ABB)
relatively successful turnaround of its Power Grids business ends the
way many, if not most, investors hoped it would – the company is selling
off the business. While the transaction is messy, I think management
got decent-to-good value for a hard-to-move asset. I also believe the
subsequent corporate restructuring is logical and should boost long-term
margins, but there’s a grumpy skeptic part of my brain that says a lot
of these costs, charges, and restructuring efforts could be used to mask
lackluster underlying performance over the next 18-24 months, and I
don’t like the extent to which management tried to celebrate their
current market positioning.
I still own these shares
and I still believe this can be a better-run, more profitable, and more
successful business than it is. Whether management has the talent to
make that happen is still up for debate. I’m not changing my fair value
($25 per share) at this point, but I would note that the risks and costs
are weighted to the near term, while the benefits are weighted further
down the line.
Read the full article:
ABB Punting Power Grids, But Priming The Pump For Growth Will Take Time
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