September 25, 2016
NYSE: ABB
ABB LTD
BUY
A+
A
A-
HOLD
B+
B
Annual Dividend Rate
$0.76
B-
C+
C
Annual Dividend Yield
3.34%
SELL
C-
D
D-
Beta
1.31
Sector: Industrials
ABB BUSINESS DESCRIPTION
ABB Ltd provides power and automation
technologies for utility and industrial customers
worldwide.
D+
E+
E
E-
Market Capitalization
$50.5 Billion
F
BUY
52-Week Range
$15.74-$22.88
Sub-Industry: Electrical Components & Equipment
Weekly Price: (US$)
SMA (50)
RATING SINCE
TARGET PRICE
04/25/2016
$26.35
Price as of 9/22/2016
$22.81
Source: S&P
SMA (100)
1 Year
2 Years
28
TARGET
TARGET
TARGETPRICE
PRICE
PRICE$26.35
$26.35
$26.35
TARGET
26
24
STOCK PERFORMANCE (%)
3 Mo.
Price Change
7.29
1 Yr.
28.87
3 Yr (Ann)
-1.38
12 Mo.
-9.37
-34.26
-30.64
3 Yr CAGR
-5.51
-15.44
-13.99
22
GROWTH (%)
20
Last Qtr
-5.33
-30.96
-26.93
Revenues
Net Income
EPS
18
16
Rating History
RETURN ON EQUITY (%)
ABB
Q2 2016
13.27
Q2 2015
17.45
Q2 2014
14.48
BUY
Ind Avg
19.13
20.40
17.61
S&P 500
11.83
13.71
14.43
BUY
HOLD
Volume in Millions
30
20
10
2015
P/E COMPARISON
BUY
0
2016
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
29.62
23.68
25.19
ABB
Ind Avg
S&P 500
2014
2015
HIGHLIGHTS
Net operating cash flow has significantly increased by 80.93% to $1,082.00 million when compared to the
same quarter last year. In addition, ABB LTD has also vastly surpassed the industry average cash flow growth
rate of 28.62%.
Q2 0.19
Compared to its closing price of one year ago, ABB's share price has jumped by 28.87%, exceeding the
performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over
the last year has already helped drive it to a level which is relatively expensive compared to the rest of its
industry. We feel, however, that other strengths this company displays justify these higher price levels.
Q1 0.23
Q4 0.09
Q3 0.26
Q2 0.26
Q1 0.25
Q4 0.29
Q3 0.31
Q2 0.28
Q1 0.24
EPS ANALYSIS¹ ($)
RECOMMENDATION
We rate ABB LTD (ABB) a BUY. This is driven by several positive factors, which we believe should have a
greater impact than any weaknesses, and should give investors a better performance opportunity than most
stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from
operations, solid stock price performance and largely solid financial position with reasonable debt levels by
most measures. We feel its strengths outweigh the fact that the company has had sub par growth in net
income.
2016
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental
data items.
The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average,
implying that there has been a relatively successful effort in the management of debt levels. Although the
company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for
future problems.
Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.9%.
Since the same quarter one year prior, revenues slightly dropped by 5.3%. The declining revenue appears to
have seeped down to the company's bottom line, decreasing earnings per share.
ABB LTD's earnings per share declined by 26.9% in the most recent quarter compared to the same quarter a
year ago. The company has suffered a declining pattern of earnings per share over the past two years.
However, we anticipate this trend to reverse over the coming year. During the past fiscal year, ABB LTD
reported lower earnings of $0.86 versus $1.12 in the prior year. This year, the market expects an improvement
in earnings ($1.07 versus $0.86).
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 1
September 25, 2016
NYSE: ABB
ABB LTD
Sector: Industrials Electrical Components & Equipment Source: S&P
Annual Dividend Rate
$0.76
Annual Dividend Yield
3.34%
PEER GROUP ANALYSIS
20%
AYI
V
FA
AB
OR
ST
LE
UN
R
VO
FA
-15%
HUBB
Price as of 9/22/2016
$22.81
The US electrical equipment industry is divided into two segments, electrical components & equipment and
heavy electrical equipment. The electrical components & equipment segment includes manufacturers of
small-scale electrical equipment, such as motors, electric heating, and cooling systems, small generators,
storage batteries, and related equipment. The heavy electrical equipment segment includes manufacturers of
power-generating equipment and other equipment, such as power turbines, machinery for fixed-use, and
large electrical systems.
AME
ETN
LE
AB
Revenue Growth (TTM)
52-Week Range
$15.74-$22.88
There are more than 2000 electrical equipment companies operating in the industry. The industry is cyclical
and manufacturers distribute their products to other manufacturing industries, wholesalers, and the
construction industry. Major players are ABB (ABB), Eaton Corp (ETN), Rockwell Automation (ROK), Emerson
Electric (EMR), Plug Power (PLUG), and Ametek (AME).
ENS
RBC
ABB
Market Capitalization
$50.5 Billion
INDUSTRY ANALYSIS
REVENUE GROWTH AND EBITDA MARGIN*
GNRC
Beta
1.31
ROK
EMR
10%
27.5%
EBITDA Margin (TTM)
Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $2.3 Billion and $50.5 Billion.
Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and
Amortization.
Establishing an efficient and flexible supply chain drives manufacturing excellence. With increasing
competition from global players, minimizing inventory and lead times while maximizing top-line with
quick-to-market products is crucial. Electric power equipment, including metal-clad switchgear, switchgear
relays, and ducts, has growth potential in the electric utilities market due to the increasing investment in
automated systems, which results in greater efficiency and lower operating costs. Latin America and Asia,
with their increasing population, rapid industrialization, and strong infrastructure investments, represent a
substantial portion of the export market.
The industry may incur significant expenditures going forward because of the need to produce manufacturing
equipment with lower carbon dioxide emissions. The United Nations Framework Convention on Climate
Change expects to reduce total electricity consumption 40% by 2056. The industry is dependent on electrical
distributors and industry wholesalers, who form the main distribution channel. These distributors control
visibility and availability of products to the end market. These distribution companies, which typically work on
low margins, make it challenging for smaller players to compete. The largest distributors acquire smaller
independent distributors in order to gain market share.
20%
REVENUE GROWTH AND EARNINGS YIELD
AYI
V
FA
AB
OR
LE
ST
LE
AB
-15%
R
VO
FA
ABB
2%
Low interest rates may boost capital expenditure and mergers and acquisitions in the domestic market.
Demand for electrical transmission and distribution equipment is expected to grow 3.6% per annum due to
anticipated increases in non-utility generation and regulatory activities, which will spur investment in the
electric grid.
HUBB
ENS
UN
Revenue Growth (TTM)
GNRC
AMERBC
ROK
Electronics and electrical equipment manufacturers are trying to streamline operations and eliminate waste.
Many companies are pursuing reduced operating costs and increased manufacturing flexibility by
implementing improvement methodologies such as lean manufacturing and Six Sigma. In order to be cost and
price competitive, manufacturers are moving component and final assembly production to facilities outside of
the US.
PEER GROUP: Electrical Equipment
ETN
EMR
6.5%
Earnings Yield (TTM)
Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -11.7% and
19.5%. Companies with NA or NM values do not
appear.
Ticker
ABB
ST
HUBB
EMR
ENS
ETN
RBC
GNRC
ROK
AYI
AME
Recent
Company Name
Price ($)
ABB LTD
22.81
SENSATA TECHNOLOGIES HLDG N 38.92
HUBBELL INC
107.22
EMERSON ELECTRIC CO
52.80
ENERSYS INC
69.44
EATON CORP PLC
64.09
REGAL BELOIT CORP
59.40
GENERAC HOLDINGS INC
34.96
ROCKWELL AUTOMATION
118.58
ACUITY BRANDS INC
260.95
AMETEK INC
48.11
Market
Cap ($M)
50,518
6,649
5,933
33,979
3,016
29,142
2,658
2,303
15,344
11,452
11,182
Price/
Earnings
29.62
16.85
22.06
18.72
23.46
15.79
18.74
32.07
21.02
42.64
20.21
Net Sales
TTM ($M)
34,341.00
3,077.93
3,450.30
20,581.00
2,354.78
20,153.00
3,312.60
1,371.03
5,948.40
3,125.40
3,908.61
Net Income
TTM ($M)
1,687.00
397.56
276.70
1,845.00
132.34
1,873.00
142.30
74.31
745.80
268.00
565.60
The peer group comparison is based on Major Electrical Components & Equipment companies of comparable size.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 2
September 25, 2016
NYSE: ABB
ABB LTD
Sector: Industrials Electrical Components & Equipment Source: S&P
Annual Dividend Rate
$0.76
Annual Dividend Yield
3.34%
Beta
1.31
Market Capitalization
$50.5 Billion
52-Week Range
$15.74-$22.88
Price as of 9/22/2016
$22.81
COMPANY DESCRIPTION
ABB Ltd provides power and automation technologies for
utility and industrial customers worldwide. The
company's Discrete Automation and Motion segment
provides motors, generators, variable speed drives,
programmable logic controllers, robots and robotics,
solar inverters, wind converters, rectifiers, and excitation
systems, as well as power quality and protection
solutions, electric vehicle fast charging infrastructure
solutions, components and subsystems for railways, and
related services for discrete automation, process
industries, transportation, and utilities. Its Low Voltage
Products segment provides protection, control, and
measurement for electrical installations; enclosures,
switchboards, electronics, and electromechanical
devices for industrial machines and plants; products for
wiring and cable management, cable protection systems,
power connection, and safety; and building control
systems for home and building automation. The
company's Process Automation segment develops and
sells control and plant optimization systems, automation
products and solutions, and industry-specific application
services for the oil, gas, petrochemicals, metals and
minerals, marine and turbocharging, pulp and paper,
chemical and pharmaceuticals, and power industries. Its
Power Products segment offers circuit breakers,
switchgears, and capacitors, as well as instrument,
power, distribution, and traction transformers for
electrical and other infrastructure utilities, as well as
industrial and commercial customers. The company's
Power Systems segment provides transmission and
distribution systems, as well as power plant automation
and electrification solutions, including monitoring and
control products, software and services, and components
for power generation, transmission and distribution
utilities, and other infrastructure utilities, as well as
other industrial and commercial enterprises. ABB Ltd
was founded in 1883 and is headquartered in Zurich,
Switzerland.
STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of ABB shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stock’s
valuation. Please refer to our Valuation section on page 5 for further information.
ABB LTD
Affolternstrasse 44
Zurich 8050
CHE
Phone: 41 43 317 71 1
Fax: 41 43 317 44 2
http://www.abb.com
Employees: 136000
THESTREET RATINGS RESEARCH METHODOLOGY
FACTOR
SCORE
1.5
Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, ABB has a growth score better than 20% of
the stocks we rate.
strong
3.5
Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 60% of the companies we
cover.
strong
4.5
Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 80% of the companies we review.
strong
4.0
Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 70% of the stocks we monitor.
strong
4.5
Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 80% of the companies we analyze.
strong
4.5
Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. The company's
dividend is higher than 80% of the companies we track.
strong
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 3
September 25, 2016
NYSE: ABB
ABB LTD
Sector: Industrials Electrical Components & Equipment Source: S&P
Annual Dividend Rate
$0.76
Annual Dividend Yield
3.34%
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
0.30
1.07 E
1.09 E
Q3 FY16
2016(E)
2017(E)
Beta
1.31
Market Capitalization
$50.5 Billion
52-Week Range
$15.74-$22.88
Price as of 9/22/2016
$22.81
FINANCIAL ANALYSIS
ABB LTD's gross profit margin for the second quarter of its fiscal year 2016 has decreased when compared to
the same period a year ago. Sales and net income have dropped, although the growth in net income
underperformed the average competitor within the industry, the revenue growth did not. ABB LTD has weak
liquidity. Currently, the Quick Ratio is 0.93 which shows a lack of ability to cover short-term cash needs. The
company's liquidity has decreased from the same period last year.
During the same period, stockholders' equity ("net worth") has decreased by 12.53% from the same quarter
last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial
difficulties could develop in the future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.
INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)
Q2 FY16
8,677.00
954.00
667.00
406.00
Q2 FY15
9,165.00
1,289.00
996.00
588.00
Q2 FY16
6,357.00
42,003.00
8,008.00
12,719.00
Q2 FY15
5,187.00
42,693.00
7,988.00
14,541.00
Q2 FY16
31.14%
10.99%
7.69%
0.82
4.01%
13.27%
Q2 FY15
32.88%
14.06%
10.87%
0.89
6.01%
17.45%
Q2 FY16
1.30
0.39
74.00
9.01
Q2 FY15
1.47
0.35
88.00
11.32
Q2 FY16
2,127
0.00
0.19
5.98
NA
1,728,347
Q2 FY15
2,221
0.59
0.26
6.55
NA
1,761,556
BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume
2 Sum of quarterly figures may not match annual estimates due to
use of median consensus estimates.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 4
September 25, 2016
NYSE: ABB
ABB LTD
Sector: Industrials Electrical Components & Equipment Source: S&P
Annual Dividend Rate
$0.76
Annual Dividend Yield
3.34%
Beta
1.31
Market Capitalization
$50.5 Billion
52-Week Range
$15.74-$22.88
Price as of 9/22/2016
$22.81
$24
Price/Earnings
$22
ABB 29.62
Peers 23.68
• Premium. A higher P/E ratio than its peers can
signify a more expensive stock or higher growth
expectations.
• ABB is trading at a significant premium to its peers.
HOLD: $17.37
BUY: $20.59
2 Year Chart
BUY: $21.38
VALUATION
BUY. ABB LTD's P/E ratio indicates a premium compared to an average of 23.68 for the Electrical Equipment
industry and a premium compared to the S&P 500 average of 25.19. To use another comparison, its
price-to-book ratio of 3.81 indicates a premium versus the S&P 500 average of 2.82 and a discount versus the
industry average of 4.10. The price-to-sales ratio is well below both the S&P 500 average and the industry
average, indicating a discount.
BUY: $23.01
RATINGS HISTORY
Our rating for ABB LTD has not changed since
4/25/2016. As of 9/22/2016, the stock was trading at
a price of $22.81 which is .3% below its 52-week
high of $22.88 and 44.9% above its 52-week low of
$15.74.
$20
$18
2014
2015
1
2
3
premium
Price/Projected Earnings
1
2
From
Hold
Buy
Hold
Buy
Buy
To
Buy
Hold
Buy
Hold
Buy
Price reflects the closing price as of the date listed, if available
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS
(as of 9/22/2016)
41.49% Buy - We believe that this stock has the
opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.
31.19% Hold - We do not believe this stock offers
conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.
27.32% Sell - We believe that this stock is likely to
decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.
TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
Research Contact: 212-321-5381
Sales Contact: 866-321-8726
5
3
4
5
1
2
3
premium
4
5
Price/Sales
1
2
premium
3
4
5
Price to Earnings/Growth
4
5
discount
1
2
3
premium
4
5
discount
ABB 1.29
Peers 3.27
• Discount. The PEG ratio is the stock’s P/E divided
by the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
• ABB trades at a significant discount to its peers.
Earnings Growth
1
2
3
4
lower
5
higher
ABB -30.64
Peers -16.98
• Lower. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
• However, ABB is expected to significantly trail its
peers on the basis of its earnings growth rate.
Sales Growth
discount
ABB 1.41
Peers 2.09
• Discount. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
• ABB is trading at a significant discount to its
industry on this measurement.
3
ABB 10.99
Peers 13.13
• Discount. The P/CF ratio, a stock’s price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
• ABB is trading at a discount to its peers.
discount
ABB 3.81
Peers 4.10
• Average. A lower price-to-book ratio makes a stock
more attractive to investors seeking stocks with
lower market values per dollar of equity on the
balance sheet.
• ABB is trading at a valuation on par with its peers.
2
premium
discount
ABB 20.93
Peers 19.64
• Average. An average price-to-projected earnings
ratio can signify an industry neutral stock price and
average future growth expectations.
• ABB is trading at a valuation on par with its peers.
Price/Book
1
Price/CashFlow
discount
premium
MOST RECENT RATINGS CHANGES
Date
Price
Action
4/25/16
$20.59
Upgrade
9/29/15
$17.37 Downgrade
2/23/15
$21.38
Upgrade
2/3/15
$19.95 Downgrade
9/22/14
$23.01 No Change
4
1
2
3
lower
4
5
higher
ABB -9.37
Peers -0.93
• Lower. A sales growth rate that trails the industry
implies that a company is losing market share.
• ABB significantly trails its peers on the basis of
sales growth
DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT® Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.
This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2016. All rights reserved.
Report Date: September 25, 2016
PAGE 5