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Update Report
June 28 2011
Strong Buy



52-week range

$17.20 - $27.58

Market Cap $57.33B
Shares Outstanding 2.28B
Average Volume 2,914,450
Book Value $7.00
Price/Book 3.59
EPS $1.20
Dividend 1.9%
Target Price $31 - $32
Target Percentage 24% - 28%

ABB Ltd. is a major international company, headquartered in Switzerland. The company is engaged in providing a broad range of power equipment and technology to the electric utility industry as well as large industrial customers requiring specialized power requirements. Products of the company include power transmission lines, switches and turn-key power systems.

We continue to recommend ABB Ltd for the following reasons:

  • ABB is experiencing strong growth during the first half of 2011. Over the past several months total orders have increased 25% and profitability has gained over 30%.
  • Order growth has been especially strong in the Mid-East countries and the Latin America countries, where orders rose 41%. Over the past month, ABB has received over $370 million in orders.
  • Currently, ABB has an order backlog of $29 billion, which is a 15% increase from the previous quarter.
  • ABB has a strong financial condition with a net cash position (cash minus debt) of $2.2 billion. The company generates cash flow in excess of $6.5 billion on an annual basis.
  • In January 2011, ABB purchased Baldor Electric for $4.2 billion in cash. This acquisition has been quite positive with sales and profits up over 30% since January.
  • At the present time, ABB pays an annual dividend of $0.55 per share for a yield of 1.9%. In view of the strong operating results, we expect the company will raise its dividend. ABB has increased its dividend each year over the five years.

We are increasing our target price to $31 - $32 per share from its current level of $28 - $29 per share.

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