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ABB Downgraded to Strong Sell on Disappointing Q2 Earnings

Zacks Equity Research

Zacks Investment Research downgraded ABB Ltd. (ABB) to a Zacks Rank #5 (Strong Sell) on Jul 26.

Why the Downgrade?

ABB witnessed sharp downward estimate revisions after reporting dismal second-quarter 2014 results.

On Jul 23, ABB reported second-quarter 2014 earnings per share of 28 cents, missing the Zacks Consensus Estimate of 30 cents and tumbling 15.2% from the prior-year quarter’s figure of 33 cents. The company had missed the Zacks Consensus Estimate in 3 of the 4 trailing quarters with an average miss of 8.1%.

Revenues for the quarter were approximately flat year over year at $10.2 billion but lagged the Zacks Consensus Estimate of $10.5 billion.

The company’s results had been impacted by the continued weakness in its Power Systems segment. This apart, the performance of Process Automation and Power Products segments were also below expectations.

Though the strong order growth led to a temporary gain in share prices on Jul 24, weakness in some of its segments especially, Power Systems and the shrinking margins remain headwinds going forward.

The Zacks Consensus Estimate for 2014 earnings dipped 3.3% to $1.20 per share, reflecting a yearly decline of 2.44%. For fiscal 2015 also, the Zacks Consensus Estimate declined 5.3% to $1.53 per share.

Estimates for fiscal 2014 and 2015 dropped 3.1% and 5.3% to $1.20 and $1.53 per share, respectively.

Other Stocks to Consider

Some better-ranked stocks that can be considered at present include EnerSys (ENS), AO Smith Corp. (AOS) and Emerson Electric Co. (EMR). While EnerSys sports a Zacks Rank #1 (Strong Buy), both AO Smith and Emerson Electric Co have a Zacks Rank #2 (Buy).

Read the Full Research Report on ABB
Read the Full Research Report on EMR
Read the Full Research Report on AOS
Read the Full Research Report on ENS

Zacks Investment Research