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On Monday, CFRA analysts downgraded ABB LTD (ST:ABBN:SW) (NYSE: ABB) stock rating from Buy to Hold and reduced the price target from CHF58.00 to CHF45.00. The revision reflects a more cautious outlook on the company’s near-term performance due to potential economic headwinds. According to InvestingPro data, ABB’s overall financial health score is currently rated as WEAK, with a concerning -2.28% revenue decline in the last twelve months.
The downgrade to a Hold rating signifies a shift in expectations, as analysts at CFRA view the rising threat to global economic growth from trade tensions as a significant factor likely to impact ABB’s business. The imposition of tariffs may affect the competitiveness of ABB’s products, while wavering business confidence and postponed industrial investments could suppress demand for the company’s automation and electrification solutions. The company’s current market position shows signs of stress, with a year-to-date return of 13.25% but a concerning -19.66% return over the past year.
CFRA’s decision to lower the 12-month target price to CHF45 is based on a valuation that represents a 2025 EV/EBITDA multiple of 14.3 times, which is above the peer average forward EV/EBITDA of 11.2 times. Based on InvestingPro analysis, ABB appears to be overvalued at current levels. The company’s current return on invested capital is -26%, significantly below historical levels, challenging the premium valuation assumption.
In their commentary, CFRA analysts acknowledge that while current global trade issues pose risks to ABB’s immediate business prospects, the company is still well-positioned to benefit from long-term industry trends. The shift towards automation, electrification, infrastructure investments, more complex industrial processes, and sustainability initiatives are expected to drive future demand for ABB’s offerings. Investors should note that ABB’s next earnings report is scheduled for May 13, 2025, which could provide crucial insights into the company’s trajectory.
CFRA also revised its earnings projections for ABB, cutting the 2025 earnings per share (EPS) estimate to $2.28 from the previous forecast of $2.40. However, the firm maintained its 2026 EPS forecast at $2.70, indicating confidence in ABB’s ability to grow its earnings in the longer term. This outlook suggests that while near-term hurdles exist, the company’s long-term prospects remain intact. InvestingPro subscribers can access additional earnings forecasts and over 30 more financial metrics to make informed investment decisions.
In other recent news, ABB Ltd (SIX:ABBN) has experienced a downgrade in its stock rating by Erste Group, moving from Buy to Hold. This change follows ABB’s forecast of a positive book-to-bill ratio and organic revenue growth in the mid-single-digit percentage range for the full year 2025. Despite these optimistic projections, Erste Group highlighted a slight decline in ABB’s operating margin and cash flow during the fourth quarter of 2024. The analysts at Erste Group consider ABB’s stock to be appropriately valued, reflecting a moderate growth outlook. Investors are now assessing the impact of this rating change on their portfolios. ABB’s financial outlook remains cautiously optimistic, but recent figures indicate challenges in profitability and cash generation. The market will be watching closely to see if ABB can meet its growth expectations while improving operational efficiency.
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