Value Line has initiated coverage of ABB Ltd. (ABB) in its flagship product, The Value Line Investment Survey. The company is a leader in global power and automation services, providing solutions aimed at boosting industrial productivity, increasing power grid reliability, and enhancing energy efficiency. It is the largest provider of industrial motors and drives, generators to the wind industry, and power grids worldwide.
The ABB Group, for which ABB Ltd. is the holding company, was formed through the 1988 merger of Asea AB and BBC Brown Boveri AG. Founded in 1883, Asea AB is credited with participating in the introduction of electricity to Swedish homes and businesses, as well as the development of the country’s railway network. Meantime, BBC Brown Boveri (originally Brown Boveri and Cie) was founded in 1891 and initially focused on power generation and turbines. Together, they now employ more than 147,000 individuals in approximately 100 countries around the globe.
ABB Ltd. is headquartered in Switzerland, and its shares trade on the stock exchanges of Zurich, Stockholm, and New York. Its American Depository Shares (ADS) have traded on the New York Stock Exchange under the ticker symbol ABB since April of 2001. One ADS is equal to 1.03 Swiss share.
The company’s operations are made up of five divisions: Power Products; Power Systems; Discrete Automation and Motion; Low Voltage Products; and Process Automation. These units serve two distinct markets: Power and Automation. ABB serves the Power market primarily through providing solutions designed to deliver electricity, while its operations aimed at the Automation sector improve industrial productivity, energy efficiency, and product quality in industrial and manufacturing applications.
Power Products offers a number of solutions, including circuit breakers, capacitors, power distribution and traction transformers, across a number of voltage levels. This segment was ABB’s largest by revenue in 2013, generating 26% ($11.0 billion) of the top line. Power Systems provides solutions for traditional and renewable energy based power generation plants, transmission grids, and distribution networks, making up 20% ($8.4 billion) of revenues last year. Discrete Automation and Motion, which contributed 24% ($9.9 billion) to the top line in 2013, provides solutions to manufacturers, such as motors and generators. The Low Voltage Products unit offers solutions for multiple electrical applications, and accounted for 18% ($7.7 billion) of 2013 revenues. Process Automation provides products and services aimed at improving the productivity of industrial processes. This segment made up 20% ($8.5 billion) of the top line last year.
Although the ABB shares have underperformed the broader market averages of late, the company has logged consistent top- and bottom-line gains over the past couple of years, which is promising. In fact, results will probably only strengthen, owing to increased infrastructure spending, amid a steadily improving global economic backdrop. Indeed, we anticipate steady growth in the United States, further recovery in Europe, as well as ongoing economic development in emerging nations. Meantime, the company exhibits considerable strength in the markets it serves, which leaves it well positioned to benefit from better underlying industry trends. This ought to translate into better stock price momentum over the long haul.
All things considered, investors are encouraged to consult our current report on ABB Ltd. in this week’s Issue of The Value Line Investment Survey, as well as our future quarterly reviews and supplementary reports, for a more comprehensive view of this equity.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.