ABB Reports Mixed Results; Hikes Dividend
Swiss engineering giant ABB Ltd. (NYSE: ABB – $22.61) said that its fourth-quarter profit jumped from the previous year despite a slight drop in revenue. The company reported net income of $489 million, up from $204 million in the fourth quarter of 2015, but missed consensus forecasts of $531 million. Net income was $0.23 per share, up from $0.09 per share in the year-ago quarter. Operational earnings were $0.33 per share, down from $0.35 per share in the prior year period. The Street consensus called for earnings of $0.26 per share. Revenues were $8.99 billion, down from $9.24 billion reported for the same period last year. The Street consensus called for revenues of $8.94 billion. Large orders ($15 million and above) were 35% higher thanks to large contracts in Power Grids and Discrete Automation and Motion. However, total order backlog at the end of December 2016, amounted to $23 billion, 1% lower compared with the end of 2015.
The company summed up guidance as follows: Macroeconomic and geopolitical developments are signaling a mixed picture with continued uncertainty. Some macroeconomic signs remain positive in the United States and growth in China is expected to continue. The overall global market remains impacted by modest growth and increased uncertainties, e.g., Brexit in Europe and geopolitical tensions in various parts of the world. Oil prices and foreign exchange translation effects are expected to continue to influence the company’s results. With this and the ongoing transformation of ABB, we expect 2017 to be a transitional year.
The company also raised its annual dividend by about 0.3%. While the stock is trading down 3.5% after the news, I still believe these high-quality shares have strong appreciation potential and can be maintained for recovery and income.