ABB Earnings: Full-Year Guidance Raised After Better-Than-Expected Order and Sales Growth

Wide-moat ABB reported organic order growth of 9% to $9.45 billion during the first quarter, significantly above company-compiled consensus of $8.40 billion, which highlights the mission-critical nature and high switching costs of the group’s products, alleviating investor concerns about an economic downturn hitting the business (at least for the time being). Organic revenue growth of 22% was broad-based across operating segments, driven by the execution of its order backlog without any supply chain constraints and spillover effects of price increases implemented last year. A book/bill ratio of 1.20 times is a likely indicator that revenue growth is likely to persist (despite weakness in the residential end market) and has given management confidence to raise full-year organic revenue guidance to at least 10%, a substantial increase from initial expectations of 5%. While we plan to revise our forecasts for the better-than expected start to the year, we don’t expect a meaningful change to our investment recommendation, underpinned by our $37 fair value estimate, which we maintain. Shares are fairly valued.