Shares of Swiss engineering and automation giant ABB Ltd. (NYSE: ABB – $19.85) are retreating about 3% in today’s trading as earnings fell in the fourth quarter despite a rise in orders. Large orders rose 6% to end the year at $13.1 billion and service orders were up 5% and represent 20% of total orders. The company’s profit for the period was $317 million equal to $0.30 per ADR, three cents below last year’s fourth quarter and $0.04 less that Street estimates. ABB said profitability was hit by higher costs and charges from legacy operations as well as the acquisition of GE’s Industrial Solutions business. Revenue rose to $7.40 billion, an improvement in all regions and businesses from a restated figure of $6.80 billion, which excluded the Power Grid business being sold to Hitachi. The company experienced strong growth in its Robotics and Motion segment as well as its Electrification Products business. The Industrial Automation segment grew by about 4% and service revenues were up 4%, enhanced by ABB’s leading digital portfolio. Management said the GE acquisition contributed a net positive of 8% to revenues. In addition to the sales and earnings report, the company proposed an annual dividend of $0.80 a share in the upcoming year, up from $0.78 a year earlier and yielding about 4%.
Looking ahead, the company sees macroeconomic signs that are mixed in Europe and trending positively in the United States with growth expected to continue in China. ABB’s leadership position in these geographical areas should lead to solid long-term growth. Earnings per share for 2019 are being estimated by analysts at $1.49 vs. last year’s $1.33. As ABB simplifies its operating structure, I anticipate steady sales and earnings advances out to the 2021-2023 stretch and should provide for decent total returns. These shares hold appeal for patient conservative investors with an eye on income.