ABB Shares Up 17% in 6 Months: What's Driving the Stock?
Shares of ABB Ltd ABB have gained 16.8% in the past six months, outperforming the industry’s 9.8% increase. Healthy demand environment across most segments and pricing actions are driving the company’s performance.
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Catalysts Behind the Price Surge
Amid a healthy demand environment, growth across segments is expected to have driven shares of ABB. Stable demand across most customer segments and strength in the Flow business is aiding the Electrification segment. Continued volume recovery in both the short cycle and systems-related businesses is driving the Motion segment’s performance. The acquisitions of PowerTech Converter and Siemens' low voltage NEMA motor business are expected to fortify the segment’s performance.
With easing component shortages, a recovery in volumes is supporting growth of ABB’s Robotics & Discrete Automation unit. Robust customer activity in the marine & ports, mining and refining and renewables markets bodes well for the Process Automation segment. For the first quarter of 2023, ABB anticipates double-digit comparable revenue growth. For 2023, it expects comparable revenue growth to be more than 5%.
Handsome rewards to shareholders through dividends and share buybacks are likely to have boosted ABB’s shares. In 2022, ABB paid out dividends worth $1,698 million. The company bought back over 80 million shares in the period.
ABB’s portfolio reshaping actions are driving its growth. The company’s acquisition of a majority stake in InCharge Energy (January 2022) enhanced its E-mobility business by expanding its customer base and boosting its fleet electrification software and digital services offering in North America.
Besides acquiring complementary businesses, ABB is divesting non-core operations to boost profits. In December 2022, the company sold its remaining 19.9% equity stake (80.1% of the stake was divested in 2020) in the Hitachi Energy joint venture to Hitachi, Ltd. ABB has realized a net positive cash inflow of approximately $1.425 billion in the fourth quarter of 2022 as part of the divestment. The divestment allows the company to focus more on key market trends and customer needs of electrification of transport and industry, automated manufacturing, digital solutions and increased sustainable productivity.
In October 2022, ABB completed the spin-off of its turbocharging unit, Accelleron. The spin-off is part of the company’s portfolio management strategy and helped it to focus on growing global megatrends in electrification and automation.
Zacks Rank & Other Key Picks
ABB currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks within the broader Industrial Products sector are as follows:
Deere & Company DE currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 4.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Deere has an estimated earnings growth rate of 31% for the current fiscal year. The stock has gained 10.2% in the past six months.
Ingersoll Rand IR presently carries a Zacks Rank #2. The company delivered a four-quarter earnings surprise of 8.5%, on average.
Ingersoll Rand has an estimated earnings growth rate of approximately 3% for the current year. The stock has rallied 12.2% in the past six months.
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