ABB Wins Power Grid Deal, Boosts Jakarta's Energy Supply

ABB Ltd (NYSE:ABB) recently clinched a contract worth above $40 million from a consortium of Doosan Heavy Industries and state-owned construction firm PT Hutama Karya. Per the deal, ABB will be responsible for the upgrade and expansion of the Muara Tawar combined cycle power plant in West Java, Indonesia. The contract was booked in the fourth quarter of 2017.

Under the contract, ABB has been assigned the task to design, engineer, install as well as commission supporting components and auxiliary systems of the plant, currently operated by PT Perusahaan Listrik Negara. The project will convert the present 1,150 MW gas-fueled generator into an 1,800 MW combined-cycle power plant, offering clean energy to the greater Jakarta area. As part of the project, the company will also supply a 500 kilovolt (kV) air Insulated Switchgear (AIS) substation. Major product supplies include medium and low-voltage switchgear, generator circuit breakers, transformers and protection equipment.

Existing Business Scenario

ABB has garnered a solid reputation for winning strategic awards and forging important partnerships. Going forward, broader market conditions represent selective opportunities that can supplement its growth momentum. The company has been successful in clinching major orders across all of its three segments. Last year, the company inked a deal with Fluor Corporation (NYSE:FLR) to cater to growing needs of power grids worldwide for safe, dependable and state-of-the-art electrical substations.

Moreover, the company is poised to benefit from investments made in upgradation of the power infrastructure. The company also expects utility customers to invest in transmission and distribution projects and renewable sources like solar and wind, which should boost ABB’s growth. Notably, the Zacks Rank #3 (Hold) stock has returned 23.7% in the past year, outperforming the industry’s growth of 22.1%.

Despite these positives, ABB’s exposure to oil and gas markets makes it susceptible to current price volatility. Lower capital spending for the upstream energy end-markets might also hurt financials. Moreover, sluggish industrial production and the projected slowdown are weighing on the financials. This apart, currently, the industrial slowdown in China is posing another threat to the company’s profitability, and might impact its performance in the upcoming quarters.

Stocks to Consider

Some better-ranked stocks from the same space include Colfax Corporation (NYSE:CFX) and CIRCOR International, Inc. (NYSE:CIR) . While Colfax sports a Zacks Rank #1 (Strong Buy), CIRCOR International carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Colfax has surpassed estimates twice in the trailing four quarters, with an average positive earnings surprise of 5.3%.

CIRCOR International has outpaced estimates twice in the preceding four quarters, with an average earnings surprise of 0.2%.

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