On Friday, Citi updated its stance on ABB Ltd (SIX:ABBN:SW) (NYSE: ABB (ST:ABB)) stock, raising the price target to CHF51 from the previous CHF42, while reiterating a Buy rating for the stock. The revision follows the company's recent performance, which surpassed expectations in terms of orders and profit margins.
The banks analysis highlighted ABB's strength in sectors such as data centers and utilities, which continue to perform robustly. Additionally, there has been noticeable improvement in areas that had been underperforming, specifically building automation and the Chinese market.
ABB's Electrification business segment has shown a broad-based improvement in EBITA margins, not limited to products in short supply. This positive trend spans across a variety of products, including low and medium voltage in smart power, distribution solutions, and installation products.
The firm noted that the stock's price had reacted favorably on the same day, aligning with the anticipated rise in consensus forecasts. This uptick in share value is part of a sustained increase observed over the past six months, beginning from a low in October of the previous year.
Citi also pointed out that ABB's current trading multiple of 15.9x 2024 estimated EV/EBITA is lower compared to its peer Schneider Electric (EPA:SCHN), which trades at approximately 19x. Based on this, Citi believes there is potential for further re-rating, especially as ABB's growth and margin prospects are expected to be on par with or surpass those of Schneider. The firm stands by its Buy rating, now backed by a new price target of CHF51.
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