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ABB Hits 52-Week High

Zacks Equity Research

Shares of  ABB Ltd. (ABB) hit a 52-week high of $26.18 during yesterday’s trading session. However, the stock closed lower at $25.92, reflecting a solid year-over-year increase of 23.2%. The average trading volume for the last three months aggregated 958,744 shares.

Despite its strong price appreciation, this Zacks Rank #2 (Buy) stock still has enough potential to move upward. Its long-term EPS growth expectation of 11.6% and a market cap of $59.95 billion are some of the catalysts driving the stock.

Growth Drivers

ABB has been witnessing rising earnings estimates on the back of recent strategic acquisitions, modest third-quarter 2013 earnings, new contract wins, strong backlog and divestiture of its non-performing assets.

On Oct 25, the company reported modest third-quarter 2013 results with earnings increasing 9.1% year over year, primarily driven by the execution of its strong order backlog. The company’s top-line also rose 9% year over year. Its cash from operations stood at $1.2 billion compared with $768 million in the prior-year quarter.

Recently, ABB announced the completion of the sale of its Baldor’s generator-set business to Generac Holdings Inc. The divestiture is expected to be a win-win situation for both ABB’s Baldor Electric and Generac. Through the sale of the generator-set division, Baldor Electric will primarily focus on industrial electric motors and mechanical power transmission products, which are in line with ABB’s core portfolio.

In addition, the company won a number of strategic deals that include developing grid connection and providing supporting infrastructure for U.K.-based Vattenfall’s Pen y Cymoedd Wind Energy Project, a $23 million marine contract and a long-term service agreement from Queensland Curtis Liquefied Natural Gas.

ABB maintains a positive long-term outlook. Rising investments in grid upgrades along with increased spending on automation solutions to boost energy efficiency and productivity are benefactors for the company.

Estimate Revisions

Over the last 7 days, the earnings estimates did not show any upward or downward revision for 2013. Although there is a lacuna of estimate revisions, we envision an uptrend for the stock backed by its strong growth potential.

Other Stocks to Consider

Other stocks in the industry that look promising at the moment include EnerSys (ENS), Pioneer Power Solutions, Inc. (PPSI) and AO Smith Corp. (AOS). All three stocks carry a Zacks Rank #1 (Strong Buy).

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

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