ABB Delivering A Powerful One-Two Punch With Recovering End-Markets And Self-Improvement

 

I’d like to be smug about all of the sell-analysts that have had to scramble to justify their “sell” or “underperform” calls at much lower prices six months ago, but even I thought the rally in ABB (ABB) wasn’t likely to continue at the same pace. I really should have listened to the advice I so often give when discussing turnarounds – properly done, turnarounds of good companies can go a lot farther than even the bulls think.

So here we are about 30% later, with ABB posting another beat-and-raise quarter and seeing strength pretty much across all of its businesses. Over that time only Eaton (ETN) has outperformed these shares, with other automation and electrification names like Schneider (OTCPK:SBGSY), Rockwell (ROK), YASKAWA (OTCPK:YASKY), and Siemens (OTCPK:SIEGY) further behind. Of course, pull out to a longer-term view (like the last five years), and Eaton, Rockwell, and Schneider are well ahead.

I continue to love ABB’s leverage to important long-term trends like automation/robotics and electrification, and CEO Bjorn Rosengren is doing exactly what I hoped he’d do when he came over from Sandvik (OTCPK:SDVKY) to lead the turnaround. There could still be upside here to my 4% long-term revenue growth target and low-to-mid FCF margins, and a lot of key markets have yet to fully recover, but investors shouldn’t expect this recent share price appreciation pace to continue.

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ABB Delivering A Powerful One-Two Punch With Recovering End-Markets And Self-Improvement