Operational Improvements Will Support Structurally Higher Profitability at ABB; FVE Slightly Raised

We raise our fair value estimate to CHF 36.5 from CHF 35.0 per share for wide-moat ABB, underpinned by its shift toward a decentralized business model that will support structurally higher profitability and better reflects its underlying competitive advantages. The appointment of CEO Bjorn Rosengren, a turnaround specialist, has coincided with an increase in profitability through improved cost measures and active portfolio management. Shares are trading at a slight discount to our revised fair value estimate, but we require a greater margin of safety, especially since both Siemens and Schneider enjoy a superior outlook.