) recently announced that it expects fourth quarter 2013 basic
earnings to be 23 cents per share. The company's updated guidance
is based on a preliminary review of 2013 results. In the third
quarter of 2013, the company had reported earnings of 36 cents
The fourth quarter 2013 earnings projection includes the
effect of the additional charges owing to drags and delays in
some projects in the company's Power Systems (PS) division. The
aggregated charges amount to about $260 million and have been
accounted for in the division's operational earnings before
interest, taxes, depreciation and amortization (EBITDA).
The Zacks Consensus Estimate currently stands at 44 cents,
well above the company's expectation. We expect downward
revisions in earnings estimates for the fourth quarter and full
year 2013 following the preliminary review.
ABB's business has recently been negatively impacted by the
weak performance of its PS division that specializes in efficient
generation and transmission of power across the globe. In
December, the company incurred additional charges to compensate
for the overdue wind projects due to heavy storms near North
Moreover, ABB also faced some operational glitches in the
quarter. Apart from these, Group legacy issues and restructuring
and non-operating charges are also expected to drag down
For the quarter, the company's net income will also include an
extra charge of $50 million owing to restructuring activities
taken by the company. However, ABB expects its cash flow to be in
line with expectations as the other segments are likely to
compensate for the deficiency in the PS business.
Outlook for 2014
We believe ABB will recover to exhibit modest growth rates in
2014 driven by the increasing demand for energy efficient
products and its recent contract wins. Moreover, the increasing
global investments in power and infrastructure are likely to
strengthen the company's position in the long term.
The Zacks Consensus Estimate for 2014 earnings is currently
pegged at $1.71 per share, reflecting a year over year increase
With preliminary results on the table, we are waiting for the
release of fourth quarter and full year 2013 results on Feb
ABB currently has a Zacks Rank #3 (Hold). However, other
better-ranked stocks which are worth considering at the moment
Quanta Services, Inc.
). All three carry a Zacks Rank #2 (Buy).
ABB LTD-ADR (ABB): Free Stock Analysis Report
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