By John Revill
ZURICH (Reuters) -ABB shares soared to their highest ever level on Thursday after the Swiss engineering group posted better-than-expected first quarter profit and signalled faster growth in the coming months.
The maker of factory robots and electric motors for ships also raised its profit outlook, saying markets, such as the United States and India, were helping offset a big drop in new business from China.
ABB (ST:ABB)'s stock rose 6% after the update, hitting its highest level since the company was set up in 1988. ABB was also the biggest gainer among European industrials.
Analysts pointed to the ABB's highest ever operating profit margin during the quarter, while the drop in orders after ABB faced high comparisons with last year, was less bad than feared.
Chief Executive Bjorn Rosengren, who is due to step down at the end of July, was in an upbeat mood.
"The year got off to a good start," he told reporters. "I feel even more confident than I did coming into the year."
The 65-year-old Swede, a former CEO at Swedish engineering company Sandvik and Finnish power company Wartsila, also brushed off concerns about China.
Although orders in the company's second biggest market fell 18%, ABB was seeing signs of recovery, while other markets like India were helping compensate for that drop, Rosengren said.
"The good thing with China is that we start seeing a momentum," he said.
"Our operating units are signalling that there is more activity in the market and that we should start seeing growth in China," he added, citing recent data showing the world's second largest economy is growing faster than expected.
During its first quarter, ABB reported operational earnings before interest, tax and amortisation (EBITA) rising 11% to $1.42 billion, beating analyst forecasts for $1.36 billion.
Revenue increased by 2% on a comparable basis to $7.87 billion, missing forecasts for $8.13 billion.
ABB said it expected revenue growth to accelerate to a mid-single digit percentage range in the second quarter and kept its full year sales outlook for an increase of about 5%.
It also gave more clarity on profitability, saying it expected its EBITA margin to be around 18%, an upgrade from the previous outlook for a slight improvement from the 2023 level of 16.9%.
The results were a positive sign for ABB's rivals, which include Siemens, Schneider Electric (EPA:SCHN) and Honeywell (NASDAQ:HON), analysts said.
"We see the read-across as a general positive for electrification names across the sector, and with some rays of light for factory automation names too," said Citi analyst Martin Wilkie.