ABB Downgraded to Strong Sell - Analyst Blog

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Zacks Investment Research downgraded ABB Ltd. ( ABB ) to a Zacks Rank #5 (Strong Sell) on May 1.

Why the Downgrade?

ABB witnessed sharp downward estimate revisions after reporting disappointing first-quarter 2014 results. Shares of this power and automation technology bellwether also declined 0.83% and given its expected lower earnings growth rates in the upcoming quarters, it will witness a further downtrend.

On Apr 29, ABB reported first-quarter earnings per share of 24 cents, marking a decline of 17.2% from the prior-year figure of 29 cents. Quarterly earnings were also down 27.3% compared with the Zacks Consensus Estimate of 33 cents.

The quarterly results included the effect of additional charges from certain projects in the Power Systems (PS) division. Revenues for the first quarter were also down 1% in local currency due to a lower opening order backlog than the prior-year period and execution issues in the Power Systems division.

Further, the company also witnessed a 12% decrease in large orders (order value above $15 million), mainly in the Process Automation and Power Products businesses due to continued delay of customer capital investments in grid infrastructure and greenfield industrial development projects. Service orders also declined 6% in local currency due to ABB's exit from a large full-service contract in Finland.

This apart, the Zacks Consensus Estimate for the second quarter of 2014 decreased 10.5% to 34 cents per share over the last 7 days. Although for fiscal 2014, the estimates remained unchanged at $1.55 a share, for fiscal 2015, 3 out of 4 estimates were revised downward over the last 7 days, dragging the Zacks Consensus Estimate down by 2.3% to $1.73 per share.

Other Stocks to Consider

Not all machine and electrical stocks are performing as poorly as ABB. Some better-ranked stocks are AVT, Inc. ( AVTC ), Plug Power Inc. ( PLUG ), AO Smith Corp. ( AOS ), all carrying a Zacks Rank #2 (Buy).

ABB LTD-ADR (ABB): Free Stock Analysis Report

SMITH (AO) CORP (AOS): Free Stock Analysis Report

AVT INC (AVTC): Get Free Report

PLUG POWER INC (PLUG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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