Operational Improvements Support Structurally Higher Profitability at Wide-Moat ABB, Raising Our FVE

ABB enjoys a number one or two market position in two thirds of its product segments, which is largely derived from centuries of deep-domain expertise in supplying mission-critical equipment with a high cost of failure for a variety of end markets. Its wide range of product categories and operating businesses have led to several costly restructuring programs and underperformance versus its European Capital Goods peers, due to the complexity of the organization. The divestment of its capital-intensive Power Grids business and the appointment to CEO of turnaround specialist Bjorn Rosengren have helped simplify the group through decentralization and active portfolio management, and subsequently improved the profitability of the business, already exceeding its target EBITA margin of at least 15%. With approximately 20 business divisions remaining in the group, further portfolio optimization remains an option.