On Friday, Jefferies adjusted its financial outlook for ABB Ltd (SIX:), a global technology company listed on both ABBN:SW and NYSE:ABB (ST:). The firm reduced the price target for ABB’s shares from CHF54.00 to CHF50.00 while maintaining a Hold rating on the stock. The revision reflects lowered group order forecasts and a more cautious earnings outlook, particularly within the Robotics & Discrete Automation division.
The revised forecasts by Jefferies indicate a 2% reduction in group order expectations for both fiscal year 2024 and 2025. This is primarily due to significant revisions in the Robotics & Discrete Automation sector, where forecasts for fiscal year 2025 have been cut by 14%. The firm also projects that ABB will fall short of the group EBITA in 2025 by 2%, driven by a 250 basis point decrease in the Robotics & Discrete Automation margin. However, this is slightly mitigated by an anticipated 50 basis point increase in the Electrification margins.
The analyst noted that approximately 70% of ABB’s Machine Automation business, which accounts for about 25% of the Robotics & Discrete Automation segment, is based in Europe. The company is experiencing a particularly soft manufacturing sentiment in Germany, which has influenced the more conservative estimates.
The price target has been influenced not only by the estimate revisions but also by currency considerations, with a stronger Swiss Franc factored into the assessment. The new target reflects both the impact of lowered expectations and the currency dynamics that are currently at play.
In other recent news, ABB Ltd has been the subject of various analyst evaluations and strategic developments. Barclays initiated coverage on ABB, assigning an Underweight rating and a price target of CHF40.00, citing concerns over weaker growth outlook and margins. On the other hand, CFRA maintained a Buy rating on ABB shares and increased the price target to CHF56.00, suggesting that recent challenges in the company’s Homes segment are manageable and have been factored into the market.
Furthermore, both Citi and RBC Capital Markets have upgraded ABB’s stock due to the company’s strong performance in the data centers and utilities sectors, and improvements in previously underperforming areas like building automation and the Chinese market. These upgrades reflect the analysts’ confidence in ABB’s growth prospects, backed by market demand and strategic initiatives.
In a separate development, ABB is exploring the sale of a portion of its Emobility electric vehicle charging division, likely retaining its global DC fast charging business, but considering the sale of its China DC and global AC operations.
InvestingPro Insights
Recent data from InvestingPro provides additional context to Jefferies’ revised outlook for ABB Ltd. The company’s revenue for the last twelve months as of Q2 2024 stands at $23.77 million, with a concerning revenue growth decline of -5.55% over the same period. This aligns with Jefferies’ more cautious stance on ABB’s order forecasts.
The company’s profitability metrics also reflect challenges, with an adjusted operating income of -$6.65 million and an operating income margin of -28.0% for the last twelve months as of Q2 2024. These figures support Jefferies’ concerns about ABB’s earnings outlook, particularly in the Robotics & Discrete Automation division.
InvestingPro Tips highlight additional factors for investors to consider:
1. ABB’s earnings per share have recently declined, which corroborates Jefferies’ lowered earnings expectations.
2. The company’s stock price has experienced a negative trend recently, with a -3.76% return over the past month, quarter, and year.
These insights, along with 11 additional tips available on InvestingPro, provide a comprehensive view of ABB’s current financial situation and market performance. Investors may find these additional tips valuable for a more in-depth analysis of ABB’s prospects in light of Jefferies’ revised outlook.
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