They are guiding down growth rate... not very promising.
@@@@2011-15 targets ABB confirms its 2011-15 Group targets for operational EBITDA margin and free cash flow conversion. The company currently expects to deliver cash return on invested capital in the mid-teens. As the result of lower-than-expected GDP growth and customer capital expenditures in 2013, as well as from the impact of greater order selectivity in Power Systems, revenue growth CAGR (compound annual growth rate) over the period is now expected to be 4-5 percent. (This is comparable to the previously-communicated CAGR target of 5.5-8.5 percent based on 2010 revenues and excluding all acquisitions greater than $50 million in revenues closed after 2011 as well as Baldor, Ventyx and Mincom. The equivalent revenue CAGR target including Baldor, Ventyx and Mincom was 7-10 percent, as previously communicated.) The company expects 2014 to be a challenging year for revenue growth but expects to return to its pre-2013 growth trajectory in 2015. ABB will drive basic earnings per share growth CAGR towards the lower end of its target corridor of 10-15 percent.
I'm nervous about ABB as well. The problem is that it is one of my few core holdings going back to the crash. I had been watching / reading for a while and grabbed a little very low. I have added since and reinvest dividends. It appears to be that there are 3 primary issues troubling ABB:
2. Integrating and capitalizing on acquisitions.
3. General malaise in the world economy.
1 and 3 can be mitigated to some extent but are simply the circumstance we all find ourselves in.
2 I suspect is going less well than management likes to pretend. I think they anticipated being able to bolster their own lackluster internal growth rate by buying faster growing niche players and good technologies and it seems not to be materializing.
I don't know if the problem is simply that these things are complicated and more time is needed … perhaps they bit off more than they could chew because prices were better than they though they would be in the future or is there in-fighting and working at cross-purposes or 'teritorialism' in the top managemet that is inhibiting the integration of some of the acquisitions and their technologies.
It feels rich to me but I'm not sure if that means I should sell all / none / some.
Integrating something you purchased is quite hard. I read a study once and it said that 70% of all acquisitions are unsuccessful. Part of the problem is that what makes this niche players successful is their cultures and that is the first thing ABB gets rid of. I used to work at Bailey Controls. What made it successful was its lean managment structure and tightly couple R&D with applications. ABB came in and put in multiple layers of management and moved R&D to Europe. They pretty much discontinued the US developed products and R&D staff. The result? Lost sales, lost growth. What made Bailey attractive was the very thing that ABB got rid of. Pretty typical in buyouts.