On Thursday, JPMorgan reaffirmed its Neutral stance on ABB LTD (ST:ABBN:SW) (NYSE: ABB), maintaining a price target of CHF45.00. The firm's analysis followed ABB's third-quarter earnings report, which showed orders matching expectations, while sales fell short by 3% and 2% compared to JPMorgan and consensus estimates, respectively. However, ABB's Operational EBITA exceeded forecasts by 1%.
ABB reported an Operational EBITA margin of 19.0%, consistent with the previous quarter's record performance. This figure helped mitigate the impact of lower-than-anticipated sales. The favorable margin was partly attributed to unusually low corporate costs and reduced losses in E-Mobility, contributing approximately a 30 basis point advantage against JPMorgan's model.
The earnings report detailed performance across various business segments, with the strength in the Electrification division balancing out significant weaknesses in Robotics & Discrete Automation.
ABB has also updated its 2024 guidance, reducing its comparable revenue growth expectation from about 5% to below 5%—in line with JPMorgan's and the consensus estimates of 4.2% and 4.3%, respectively. The operational EBITA margin forecast has been slightly raised from about 18% to just over 18%, aligning with both the third-quarter results and the existing consensus figures.
The statement from JPMorgan suggests that the overall results, which align closely with the standing consensus, along with the strength in Electrification, may provide adequate support for ABB's shares. This perspective comes especially in light of the stock being considered contentious before the earnings release.
In other recent news, ABB Ltd (SIX:ABBN)'s Q3 performance drew mixed reactions from financial analysts. Jefferies maintained its Hold rating for ABB with a CHF50.00 target price, noting that while Q3 revenues fell short by 2%, operational EBITA and free cash flow exceeded estimates. The company also adjusted its full-year guidance, lowering its revenue growth forecast to below 5% while raising its margin outlook to slightly above 18%.
In contrast, Barclays initiated coverage on ABB with an Underweight rating and a lower price target of CHF40.00, citing concerns over a weaker growth outlook and margins. However, CFRA maintained a Buy rating and increased the price target to CHF56.00, suggesting that challenges in the Homes segment are manageable.
On the strategic front, ABB is reportedly exploring the sale of part of its Emobility electric vehicle charging division, likely retaining its global DC fast charging business while considering the sale of its China DC and global AC operations.
These are among the recent developments that have influenced ABB's financial outlook and strategic initiatives.
InvestingPro Insights
Recent data from InvestingPro adds depth to ABB's financial picture. The company's revenue for the last twelve months as of Q2 2024 stood at $23.77 million, with a gross profit margin of 32.41%. This solid margin aligns with ABB's strong operational performance mentioned in the earnings report, particularly the 19.0% Operational EBITA margin highlighted by JPMorgan.
InvestingPro Tips offer additional context:
1. ABB's revenue growth has been decelerating, with a quarterly revenue decline of 18.0% in Q2 2024. This trend supports ABB's decision to revise its 2024 comparable revenue growth expectation downward, as noted in the article.
2. The company's P/E ratio is negative at -7.66, indicating current profitability challenges. This metric underscores the importance of ABB's efforts to maintain strong operational margins in the face of revenue pressures.
These insights are just a sample of the valuable data available on InvestingPro, which offers 16 additional tips for ABB, providing investors with a comprehensive toolkit for analysis.
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