ABB's Profit Beats Estimates on Orders from Power Utilities

  • Maker of power grids reports lower first-quarter profit
  • Full-year earnings consensus is `too low,' Morgan Stanley says

ABB Ltd.’s quarterly profit fell less than expected after orders from power utilities helped the grid maker to withstand a slowdown in some emerging markets and in the oil and gas industry.

Demand is “better than was generally thought,” Morgan Stanley analysts including Ben Uglow said in a note. First-quarter results point to an earnings consensus for the full year that is “too low.”

ABB shares rose 3.9 percent to 20.29 Swiss francs at 10:32 a.m. in Zurich, taking the rise to 13 percent since the start of the year.

Chief Executive Officer Ulrich Spiesshofer, who may come under pressure from activist shareholder Cevian Capital AB, has pledged to cut costs and increase efficiency to try to counter weakness in demand from clients in China and the oil and mining industries. The CEO made management changes last year and began a strategic review of ABB’s power grids division, which he said Wednesday is “on track.” The company plans to issue a report on the division on Oct. 4, according to the statement.

Operational earnings before interest, taxes and amortization fell 1 percent to $943 million, the Oerlikon, Switzerland-based company said in a statement Wednesday. That beat an average estimate of $865 million of analysts surveyed by Bloomberg.

While overall orders fell 11 percent to $9.3 billion during the first quarter, the company said it won $300 million of orders from utility customers in China for transmission links and reached a deal with Danish company Dong Energy for a submarine-cable link. Mining and oil industry orders were down in the Americas, it said.

“2016 will be characterized by continued market headwinds and uncertainties from both an economic and political perspective,” Spiesshofer said on a call with journalists. Modest growth in Europe also affected earnings.

To try to bolster orders, the company is developing a range of smart sensors that can be retrofitted to existing low-voltage motors, allowing cash-strapped clients to upgrade equipment without replacing it and enabling ABB to tap into what it says is a “huge” market.

“Innovation such as this will drive our future growth,” Spiesshofer said.

(This story was corrected to show profit beat estimates.)

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