Shares of ABB Ltd moved higher in early Stockholm trading after Kepler Cheuvreux upgraded the stock to Buy from Hold, highlighting what the broker described as "underappreciated long-term earnings power" following a multi-year transformation of the business. Kepler also raised its target price to 70 Swiss francs, up from 56.
By 10:13 GMT on Tuesday, ABB shares were up around 1.5% in Stockholm.
Kepler analyst William Mackie said ABB is now better positioned to capture structural growth across electrification and automation, pointing to a decentralised operating model that spans 17 divisions and 75 business lines. That organisational change, Mackie argued, is steering revenue and profits toward the upper end of ABB's own guidance ranges.
The brokerage singled out Electrification and Motion as the primary growth engines. Mackie wrote these businesses "should drive growth, profits, and cash," supported by demand across power generation, utilities, infrastructure, data centres, mining and marine markets. In addition, the analyst noted a cyclical recovery in Smart Building and Machine Automation and the removal of losses at E-Mobility as contributors to margin improvement expected in 2026.
Reflecting his view, Kepler raised its 2027 revenue and operating EBITA forecasts by 5% and 8%, respectively, which placed its estimates above prevailing consensus figures.
"Mid-term consensus estimates in all three business areas (BAs) are only at the mid-point of ABB’s target ranges. This underappreciates the group’s revenue growth and earnings power against a strong end-market backdrop," Mackie added.
Kepler also flagged ABB's balance sheet improvement after the $5.4 billion divestment of its Robotics unit. The broker pointed to expected strong fourth-quarter 2025 cash generation and another year of high cash conversion in 2026, together with about a $5 billion inflow from the Robotics sale, as creating substantial capital flexibility. Mackie said that enhanced flexibility should support increased investment, acquisitions, dividends and potential share buybacks.
In its valuation approach, Kepler shifted more weight toward a discounted cash flow framework, reasoning that ABB's improved profitability, cash generation and greater earnings visibility justify a higher valuation methodology than previously applied.
Summary
Kepler Cheuvreux upgraded ABB to Buy and lifted its target price to 70 Swiss francs from 56, citing stronger alignment with long-term electrification and automation trends, improved divisional structure and the cash proceeds and balance-sheet benefits from the Robotics divestment. The broker raised 2027 revenue and EBITA forecasts and moved to a discounted cash flow valuation approach.
Key points
- Kepler upgraded ABB to Buy and raised the target price to 70 from 56 Swiss francs.
- Analyst expectations for 2027 revenue and operating EBITA were increased by 5% and 8%, respectively, putting estimates above consensus.
- Electrification and Motion are expected to lead growth, with Smart Building, Machine Automation and E-Mobility recovery contributing to margin expansion in 2026; markets cited include power generation, utilities, infrastructure, data centres, mining and marine.
Risks and uncertainties
- Cyclical elements remain - the anticipated recovery in Smart Building and Machine Automation is described as cyclical, indicating outcomes depend on market cycles in those sectors.
- Margin expansion expectations rely in part on elimination of E-Mobility losses and strong operational cash generation in Q4 2025 and 2026; shortfalls in cash conversion could limit capital flexibility.
- Upward revisions to 2027 forecasts and a shift in valuation approach assume sustained demand across multiple end markets; weaker demand in power generation, utilities, infrastructure, data centres, mining or marine could affect results.