ABB Earnings: Margins Reached Record Levels; Slight Improvement in Fiscal 2024 Guidance

Wide-moat ABB comfortably met its expectations set during fiscal 2023, achieving a record EBITA margin of 16.9%, marginally beating our 16.7% estimate. The 160-basis-point improvement in operating margins was broad-based across divisions. A deceleration of orders during 2023 will restrict meaningful operating leverage in fiscal 2024 and may result in a slight margin expansion at best, reflected in management’s guidance of a slight EBITA margin improvement. We believe this indicates that the major components of the restructuring under CEO Bjorn Rosengren have largely been completed. Management guided for 5% revenue growth during fiscal 2024, slightly ahead of company-compiled consensus, but in line with our estimates, which explains the slight share price increase. We maintain our CHF 36.50 fair value estimate, which is trading in line with the current share price.