ABB shares jump after profit beats forecasts

Shares in ABB Ltd. (ABBN.EB) rose sharply Thursday morning as investors shrugged off weak top-line growth to focus on second-quarter net profit, which came in ahead of expectations.

Net profit for the quarter rose 30% in U.S. dollar terms to $681 million, comfortably beating a FactSet-compiled consensus of $627 million.

"Through our continued productivity efforts, we delivered margin improvement and double-digit operational EPS growth," said ABB Chief Executive Ulrich Spiesshofer.

At 0803 GMT, technology multinational ABB traded 4.2% higher at CHF22.90 in Zurich, having earlier risen more than 5%.

Nevertheless, group revenue of $8.89 billion was up just 1% on a comparable basis, missing consensus of $9.02 billion and ABB’s own guidance of 3% to 6% sales growth.

An lack of new orders at ABB’s power-grids units dragged down overall revenue growth, according to Morgan Stanley analyst Ben Uglow.

The division, which relies on large orders from national power companies and other infrastructure operators, has struggled in recent years amid a slowdown in capital spending in the utility sector.

However, some analysts are optimistic that the cycle is starting to turn.

"Large orders have reached historically low levels and look set to rebound from current depressed levels, supported by an ongoing recovery in process industries," Deutsche Bank’s Gael de-Bray said.

Margins at the division have strengthened considerably since ABB faced calls from activist investor Cevian Capital to spin it off in 2014.

Mr. Spiesshofer said he is confident that a push into growth areas such as micro grids and e-mobility will help the unit meet its growth targets by the end of the year but didn’t discount further shakeups to the group’s operations.

"Our portfolio is not cast in stone. The guiding principle will always be what creates most value long term for all of our shareholders," he said.

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