ABB Ltd, the world's biggest builder of power networks, forecast annual earnings growth of at least 15 percent through 2011 as China, India and the Middle East invest in electrical grids.
Earnings per share may rise as much as 20 percent, Zurich-based ABB said yesterday in a statement. The Swiss company raised its profit margin target to between 11 percent and 16 percent of sales, compared with 10.6 percent last year, Bloomberg News said.
ABB predicts its Asian market will expand by 50 percent over the next five years, double the pace of Europe and the Americas. China plans to spend about US$33 billion this year on power infrastructure. The Swiss company said it's assessing potential acquisitions, even after some investors called for a buyback.
"Overall, the targets are good," said Mark Diethelm of Zuercher Kantonalbank, who has a market "overweight" rating on the stock. "The lower end of the margin corridor is lower than expected, that's very cautious of ABB. I guess they wanted to take into account there may come a year that isn't that good."
Chief Executive Officer Fred Kindle underestimated the strength of the power market as well as the speed with which the company could bounce back from near-bankruptcy in 2002. Most of the goals the company hoped to reach by 2009 were achieved last year.
Kindle also increased ABB's annual sales growth target to between eight and 11 percent, on average. Revenue grew 11 percent in 2006 and ABB had been aiming for more than five percent.
Contracts in Asia include an order for switchgear and power transformers for China's Three Gorges Dam, the world's largest hydroelectric river project.
"We have seen continuous strong demand for energy and ABB is probably the best positioned company to benefit from electricity upgrades," said Kevin Lyne-Smith, an investment consultant at Julius Baer Holding AG's private banking division in Zurich, which manages US$100 billion.