ABB LTD. ADRs $16(New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $36.8 billion; Price-to-sales ratio: 1.0; Dividend yield: 4.5%; TSINetwork Rating: Above Average; www.abb.com) is a leading maker of power technologies for utilities. The Switzerland-based company’s products include transformers, transmission systems and circuit breakers. It also makes automation systems and robotics. Clients in a range of industries use ABB’s systems to make their facilities more productive.
The company is taking advantage of the slow economy to expand its U.S. operations. In January 2011, it paid $4.2 billion for Arkansas-based Baldor Electric Co., which makes electric motors and related products, such as conveyor belts, fans and pumps.
Baldor’s contribution increased ABB’s revenue by 6.0% in the first quarter of 2012, to $8.9 billion from $8.4 billion a year earlier. Strong gains in the Americas helped offset weaker demand in Europe and Asia.
Earnings rose 4.6%, to $685 million from $655 million. Because of more ADRs outstanding, earnings per ADR rose 3.4%; to $0.30 from $0.29 (each ADR represents one ABB common share).
In May 2012, ABB paid $3.9 billion for Thomas & Betts Corp., which makes a number of industrial products, including heating and air conditioning equipment, electrical connectors and transmission towers for power companies. Combining some of its functions with those of Thomas & Betts could save ABB $200 million a year by 2016.
The company is also doing a good job of cutting its costs, mainly by making its operations more efficient and buying more raw materials from low-cost countries. These moves cut its expenses by $260 million in the latest quarter.
ABB trades at just 10.8 times the $1.48 a share that it will probably earn in 2012. The $0.72 dividend yields 4.5%.
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