ABB to Gain From Solid Demand in Markets, Risks Persist

On Nov 18, we issued an updated research report on ABB Ltd ABB.

In the past month, this Zacks Rank #3 (Hold) stock has returned 12.8% compared with the industry’s growth of 8.5%.

Existing Scenario

ABB believes that its strengthening business in the United States, coupled with stable orders across businesses in Asia, Middle East and Africa region including India, Japan, Singapore and the UAE will boost competency. Of late, the company has been experiencing solid demand for smart buildings offerings and solutions. Also, healthy demand for smart buildings solutions, strength in data center market and robust orders in motor industry are likely to benefit the company.

ABB has been steadily strengthening business through acquisitions. In this regard, the company’s buyouts of Intrion (September 2018) and GE Industrial Solutions (June 2018) have been adding value to its business. In addition, strategic corporate collaboration deals with renowned companies are expected to be beneficial.

Moreover, stronger productivity and diligent cost-cutting initiatives are likely to improve the company’s operational efficacy over time.

However, rising cost of sales has been a major concern for the company. The metric rose 2.9% in first nine months of 2019 year over year. Also, ABB incurred costs of $79 million, primarily on account of employee severance costs, in the same time frame. Escalation in costs and operating expenses, if not controlled, can severely impact margins and profitability.

Stocks to Consider

Some better-ranked stocks from the Zacks Industrial Products sector are Albany International Corporation AIN, AZZ Inc. AZZ and Energous Corporation WATT. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Albany International pulled off average positive earnings surprise of 21.27% in the trailing four quarters.

AZZ delivered average earnings surprise of 2.12% in the trailing four quarters.

Energous delivered average earnings surprise of 6.67% in the trailing four quarters.

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