ABB LTD. ADRs $23 (New York symbol ABB; Conservative Growth Portfolio, Manufacturing & Industry sector; ADRs outstanding: 2.3 billion; Market cap: $52.9 billion; Price-to-sales ratio: 1.3; Dividend yield: 3.2%; TSINetwork Rating: Above Average; www.abb.com) is a leading maker of power technologies for utilities, including transformers, transmission systems and circuit breakers. The Switzerland-based company also makes automation systems and robotics that industrial clients use to make their facilities more productive.
ABB is taking advantage of the slow economy to make acquisitions. In May 2012, it paid $3.7 billion for Thomas & Betts Corp., which makes a number of industrial products, including heating and air condi- tioning 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.
These new operations pushed up ABB’s revenue by 3.5% in 2012, to $39.3 billion from $38.0 billion in 2011. Without the negative impact of the high U.S. dollar, which hurts the contribution of its overseas operations, revenue would have risen 7% in 2012.
Earnings fell 14.6%, to $2.7 billion, or $1.18 per ADR (each ADR represents one ABB common share). In 2011, it earned $3.2 billion, or $1.38 per ADR. The decline was largely due to the extra costs to integrate Thomas & Betts. ABB also hired more salespeople.
ABB should continue to profit as power demand rises in developing countries. As well, rising competition in the manufacturing sector will prompt more of its clients to improve their efficiency— and cut their costs— by automating their facilities.
The company should earn $1.51 per ADR in 2013. The stock trades at 15.2 times that forecast. The $0.74 dividend yields 3.2%.
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