ABB LTD (ABB)

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Seeking Alpha
ABB Ltd: A Stock For 2008 and Beyond
Friday September 7, 1:12 am ET


Beris submits: ABB Ltd (ABB) is definitely a stock to own in 2008 and beyond. You could almost say that this is the safest play on the market!
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On Wednesday, ABB presented to the public its revised operational and financial targets that were (yet again!) strongly above its previous goals. The company has also announced plans to potentially acquire a big company to further catapult its growth and profitability to a whole new level.

The company is now looking at the sales growth between 8% and 11% through 2011, with aggressive goals to move its operating profit margins between 11% and 16% during that same period. Now, as it keeps delivering strong forecasts and continues to surprise, ABB has previously expected a growth and margin to be in the range between 5% and 10%, but due to the enormous global infrastructure boom, ABB plans to double those targets again!

After initial investors' reactions, where some took profits as they already anticipated new strong targets, it is time to recoup, take a deep breath and start accumulating this future giant as it conquers the world.

ABB's goal is to grow the company's EPS to between 15% and 20%, as well as bring its after-tax return to above 30% by 2011, and establish a free cash flow. Mark Diethelm, an analyst at Zuercher Kantonalbank, comments

These are really strong targets and it shows how much ABB has improved over the past few years. The targets also show that ABB wants to keep a clean balance sheet.


ABB's growth has been largely helped by demand for infrastructure update in old economies, such as the US, Canada, Australia and Europe, but also new energy infrastructure sites demands coming from emerging markets such as China, India and the Middle East. To help its growth, ABB will look to acquire a major company in the automation sector, and it is anticipated that for that it could raise $10 billion! But, it appears that S&P and Fitch are not concerned with crediting this giant, as their rating remained unchanged, citing that ABB's credit rating would not be affected by one such acquisition spree.

ABB had repeatedly beat its targets during the past few quarters, and I believe that they will continue to do so as projects around the world will continue to bring robust sales and profits for this growth company at the value prices. Reiterating ACCUMULATE, with BUY above $25.40 (as of today).