ABB Earnings: Backlog Execution and Double-Digit Pricing Drive Record EBITA Margin

Wide-moat ABB delivered impressive EBITA growth of 26% year over year, approximately double the rate of revenue growth during the same period last year. Execution of its order backlog combined with mid-single-digit price increases contributed to the strong performance and highlights the mission-critical nature and high switching costs of the group's products. All operating segments were able to report EBITA margin expansion; the group EBITA margin expanded 200 basis points to a record 17.5% for this quarter. While management announced that it expects full-year EBITA margins to exceed 16%, expectations had already been baked into consensus expectations. Organic order growth of 2%, from an already high level and a book/bill ratio above 1 times, likely indicate that the group can maintain its robust performance. We reiterate our $37 fair value estimate and view shares as fairly valued.