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I love ABB! ABB delivered a picture perfect quarter across all metrics with net income rising 87% year-over-year to over $1 billion. Revenues rose 29% to $7.96 billion. Orders rose 28% to $10.8 billion, driving the backlog up 46% compared to a year ago. The real story for me is the blowout of estimates of the operating-profit margin, which expanded to 15.9% while analysts had expected it to be around 13%. Who doesn’t love expanding margins? I’ve said I’d expect to see margins expand to around 18%.

ABB maintains its 2008 growth rates of 10% in automation and 15-20% in power. These are fabulous results, showing ABB businesses are on fire and operating improvements continue. Shares are up over 5% in Switzerland in early trade around 180 kr. Even with this move, the stock still trades below a PEG of 1, making it one of the cheapest value growth companies still! Highlights from the press release:

CFO and interim CEO Michel Demare says, “Demand from utilities and most of our major industrial markets remained strong around the world, especially in emerging economies, but also in the U.S. Customers continued to invest in areas where we are market and technology leaders - power infrastructure, energy efficiency and productivity.

“These excellent results also reflect our continuing strong operational performance,”

“Lower cost sourcing, footprint optimization, better project execution and risk management, and more efficient capacity utilization all contributed to our improved results.”

These were operational improvements former CEO Fred Kindle architected and these initiatives seem to be sustaining themselves even after Kindle quit in February. While it may be a bit early to say ABB can run just as well without Fred Kindle, such worries that caused ABB to sell off in February when Kindle left seem to be misplaced, at least for now.

Unexpectedly, ABB was a big beneficiary of higher commodity prices:

“Order growth continued in all divisions, led by Process Automation, where metals, minerals and marine customers in all regions built capacity or upgraded existing capacity to take advantage of high commodity prices and sustained demand.”

Emerging economies’ insatiable need for energy to power their new cities continues:

“Automation Products and Power Products also reported strong order growth, especially in emerging economies, reflecting favorable demand across all industrial markets and ongoing investments by power utilities in new and upgraded infrastructure.”

Finally, strength in robotics was driven by higher demand across all industries but especially by the automotive industry. This highlights the strength in autos overseas and that the disgustingly weak auto industry in the U.S. is only an U.S. problem: ” BRIC nations would produce 20 million vehicles in 2008 as against 17.4 million by both America and Canada, Scotiabank’s auto industry specialist Carlos Gomes said in a study released on Thursday.” (BRIC nations overtake North America in auto production - The Economic Times)

For the full ABB earnings release, go to http://www.abb.com/cawp/seitp202/bb97d62eeedbde75c125741c00450241.aspx

Again, as with all the other global growth names, the same themes emerge: strength in utilities, energy efficiency and conservation, power generation, infrastructure, oil and gas.  The companies are telling us the lay of the land.  Investing shouldn’t be this easy but right now it  is.  Why bother with all the traditional sectors that are junk now?  (i.e. drugs/pharma, banks, tech)  Make it easy on yourself, if you don’t know industrials that well, go learn a few.  It’s worth it in this environment.

**Disclosure: I own ABB as of this post*

Source: A Look at ABB's Picture-Perfect Quarter