ABB Revenue Slides; Lowers Outlook
Shares in Swiss engineering giant ABB Ltd (NYSE: ABB – $20.67) are sliding 6% in today’s trading after the company reported that third-quarter revenue fell from the previous year amid uncertainties over the U.S. presidential election and the U.K.’s decision to exit the European Union. ABB said third-quarter revenue fell 3.1% to $8.26 billion from to $8.52 billion in the same period a year earlier. Analysts had expected revenue of $8.33 billion. Orders fell by more than $1 billion to $7.53 billion in the three months ending September from $8.77 billion in the same period last year. Net income fell from $568 million to $577 million. However, earnings per share settled at $0.32, vs. $0.26 last year and two cents above consensus estimates. Full-year earnings will do well to come in at $0.95, based on lower orders and . . .
. . . uninspiring guidance. Macroeconomic and geopolitical developments are signaling a mixed picture for ABB with continued uncertainty. Some signs in the US remain positive and growth in China is expected to continue, although at a slower pace than in 2015. These markets will remain impacted by modest growth and increased volatility. Oil prices and foreign exchange translation effects are also expected to continue to influence the company’s results. However, I believe long-term appreciation potential is strong, given the significant earnings growth likely in the coming years. The dividend yield of 3.4% exceeds the market median, as well. Thus, total return potential out to the 2019-2021 stretch is above average and the ADR’s can be retained in a well-diversified conservative account.