ABB Steps Over A Lowered Bar, But Margin Improvement Is Still Nice

The good news is that ABB (ABB) beat earnings expectations for the third quarter. The less-good news is that expectations declined meaningfully going into earnings (about 5% or so at the EBITA line in recent weeks), lowering the bar, and the order and growth outlook is still pretty unexciting over the near term.

While investors reacted positively to the third-quarter results, and I do believe there’s long-term upside for ABB shareholders, I’d caution readers not to get too bullish on the near term. I do think key short-cycle markets like autos are closer to the bottom than not, and I’m bullish on the long-term potential for incoming CEO Bjorn Rosengren to make some meaningful improvements to the business, but ABB is a self-improvement story that will play out over years, not quarters. As I said, I do see upside from here, but it’s not the most undervalued or best risk/reward opportunity of the industrials I follow.

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ABB Steps Over A Lowered Bar, But Margin Improvement Is Still Nice