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By Ian Wyatt, NewsletterAdvisors.com |
ABB | Jul 14, 2008 |
Stock of the Week: ABB Ltd.
By Ian Wyatt, Chief Investment Strategist, NewsletterAdvisors.com
The idea of an infrastructure boom might seem foreign right now to those of us who live in the United States, and that’s exactly the point: expansion is happening in monumental proportions in the so-called BRIC countries (Brazil, Russia, India and China) and elsewhere around the world, notes emerging market specialist Horacio R. Marquez, editor of the Money Map Report and the Money Map VIP Trader. And while a ton of money has already gone into this arena, Marquez expects additional spending of $40 trillion over the next quarter-century or so.
One of the companies powering the global expansion, according to Marquez, is Zurich-based ABB Ltd. (NYSE: ABB), a leading global provider of electrical-system services and components. With 120 years in business under its belt, ABB leads the world market in power-transmission, power-management systems and industrial-automation products and systems.
"With a market value of roughly $63 billion, ABB is the world’s leading builder of power networks, making it one of the real heavyweights in a sector that includes such rivals as America’s General Electric Co. and Germany’s Siemens AG," says Marquez.
According to Reuters, over the last several months ABB has announced deals of $233 million in Korea, $74 million in India, $170 million in the Sweden-Finland regions, $53 million in Dubai and $70 million in China.
BRIC economies such as China and India are expanding at rates of 9%-10% annually and consuming massive amounts of additional power to make that happen, Marquez says.
"About a quarter of the company’s sales emanate from high-growth Asia and about a half come from Europe," says Marquez. "That’s what makes ABB such a great stock, especially right now."
In the automation field—where growth is steady, though unspectacular—ABB has installed more than $100 billion worth of systems through the years, according to Marquez, which at least provides the company with an ongoing source of revenue for replacement parts.
In April, ABB said that sales growth would average 8%-11% a year for the period from 2007-2011, adding that profits will advance at an even-brisker 11%-16% during the same period. The company also announced plans to buy back $2 billion worth of its own shares.
For the first three months ending March 31, 2008, the Swiss company recorded net income of $1 billion, or $0.44 per share; an increase of 87% over the $537 million, or $0.25 per share, earned in the same quarter in 2007. Analysts had been forecasting earnings of $0.29 per share for the period.
First-quarter revenues clocked in at $7.96 billion, compared with $6.19 billion in the first quarter of 2007.
At Friday’s close of $26.62, ABB’s shares were down about 20% from their 52-week high of $33.39 and 30% above their 12-month low of $20.42.
ABB’s next earnings report is scheduled for release July 24. For the second quarter ended June 30, two analysts polled by Thomson Financial are on average forecasting earnings of $0.40 on revenues of $8.66 billion. In the second quarter last year, ABB earned $0.23 on revenues of $7.14 billion.
ABB is certainly a company to consider for your portfolio.
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