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ABB’s Winning Streak Continues, Secures $100M U.S. Order


ABB Ltd. ABB secured an order worth over $100 million from the U.S. utility Los Angeles Department of Water and Power (LADWP), which follows a $640 million mega project in India that the company finalized two days back.

The new contract entails the modernization of the existing Sylmar HVDC (high-voltage direct current) converter station in California. This station forms a crucial part of the electricity link between the Pacific Northwest and southern California, commissioned in 1970. The order was booked in fourth-quarter 2016.

In fact, ABB forged HVDC technology over 60 years back and has been awarded over 110 HVDC projects to date. This accounts for a total installed capacity of more than 120,000 megawatts, making up around half of the global installed base.

The Pacific Intertie is the first major HVDC link to be installed in the U.S. and has delivered power to millions for nearly five decades in the U.S. After helping build the Pacific Intertie in 1965, ABB has delivered multiple performance and life-extending upgrades over the last 46 years. This contract represents ABB’s sixth order to work on the Pacific Intertie.

The Sylmar upgrade will allow securing power supplies, while delivering higher efficiency and reliability, and also enable exceptional control. Digitalization will also be an important consideration in the upgrade, and ABB will install the updated version of its most advanced digital MACH control and protection system.

ABB – a global leader in HVDC – remains at the forefront of HVDC innovation. The company is also distinctively positioned in the power sector with in-house manufacturing capability for all essential components of HVDC systems.

Further, this project is also part of the company’s “Next Level” strategy, which focuses on commitment to service and lifetime support.

ABB is likely one of the world’s best-managed industrial infrastructure, power and automation companies. Its shares have recorded an average return of 13.5% over the past six months, outperforming the Zacks categorized Machinery – Electrical industry average of 7.8%.

Also, the company has been witnessing solid activity on the earnings estimate revision front over the past month, thus reflecting bullish analyst sentiment. Over the past 60 days, the company has witnessed two upward estimate revisions versus none lower. This has led the Zacks Consensus Estimate for 2016 earnings to trend up from 98 cents to $1.09, reflecting an impressive increase of 11.2%.

We expect ABB to benefit from huge investments in HVDC and ultra high voltage DC power transmission projects, as well as continuing investments in the maintenance of aging electric infrastructures.

Further, over the long haul, this Zacks Rank #1 (Strong Buy) company believes that its prospects are bright for all three major markets, including utilities, industry and transport & infrastructure. Positive development in the electricity value chain, rapid progress of Internet of Things, Services and People, rapid urbanization and a surge in energy-efficient transport & infrastructure bode well for the company over the long term.

Other Stocks to Consider

Other stocks worth considering in the same space include KBR, Inc. KBR, A. O. Smith Corp. AOS and Donaldson Company, Inc. DCI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

KBR, which operates as an engineering, construction, and services company worldwide, has an average positive earnings surprise of 3.9%, for the trailing four quarters, beating estimates twice.

Headquartered in Milwaukee, WI, A.O. Smith is one of the leading manufacturers of commercial and residential water heating equipment, as well as water treatment products of the world. The company also boasts a striking earnings surprise history and has an average positive surprise of 5.9% over the trailing four quarters, beating estimates all through.

Donaldson Company manufactures and sells filtration systems and replacement parts worldwide. It operates through two segments, Engine Products and Industrial Products. The company has managed to beat earnings estimates twice over the trailing four quarters. In the last reported quarter, it surprised estimates by 8.6%.

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