Earnings Beat: ABB Ltd Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

As you might know, ABB Ltd (VTX:ABBN) recently reported its full-year numbers. The result was positive overall - although revenues of US$29b were in line with what the analysts predicted, ABB surprised by delivering a statutory profit of US$2.25 per share, modestly greater than expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

View our latest analysis for ABB

Following the latest results, ABB's 25 analysts are now forecasting revenues of US$30.4b in 2022. This would be a satisfactory 5.0% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to dive 42% to US$1.38 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$30.2b and earnings per share (EPS) of US$1.51 in 2022. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a minor downgrade to their earnings per share forecasts.

It might be a surprise to learn that the consensus price target was broadly unchanged at CHF36.20, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic ABB analyst has a price target of CHF53.49 per share, while the most pessimistic values it at CHF28.20. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. For example, we noticed that ABB's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 5.0% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 0.9% a year over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 7.4% per year. So although ABB's revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for ABB. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that ABB's revenues are expected to perform worse than the wider industry. The consensus price target held steady at CHF36.20, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple ABB analysts - going out to 2024, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 2 warning signs for ABB you should be aware of, and 1 of them is concerning.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.