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Why ABB's Shares Sank a Painful 15% in October

By Reuben Gregg Brewer – Nov 6, 2018 at 10:47AM

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ABB Ltd. fell sharply in October, but there wasn't anything major going on at the company.

What happened

The stock of globally diversified industrial company ABB Ltd (ABB -1.12%) fell a painful 15% in October, according to data provided by S&P Global Market Intelligence. The downtrend lasted pretty much the entire month. However, ABB's stock declines weren't out of line with its peers, with United Technologies, Emerson Electric, Honeywell, and Eaton Corp. all down in the low double digits over the same span. In fact, Vanguard Industrials ETF, a proxy for the industrials sector, was down around 11% for the month.

So what

Since ABB was basically following the broad group lower, the stock's drop is most likely a reflection of investors stepping back from the industrials space. That said, what it clearly doesn't appear to be is an indication of ABB's business performance.

Two men looking over blueprints with an industrial facility behind them

Image source: Getty Images

The company, which reported on Oct. 25, posted earnings up 6% year over on a 6% top-line gain. Comparable sales and earnings, which pulled out the impact of the company's GE Industrial Solutions acquisition, were up 3% and 4%, respectively. Orders, meanwhile, advanced a solid 10%, with gains in all divisions and all regions. And while margins were down slightly because of the GE Industrial Solutions acquisition, it was a basically a pretty good quarter overall.   

That's why it shouldn't be surprising to note that ABB's stock moved higher by around 4% in the week or so following its earnings release. That was buttressed by the generally solid outlook the company provided in the quarterly earnings release, noting the expectation for continued strength in Europe, the Americas, and China.     

Now what

The general malaise in the industrial sector has lasted most of the year, with October being a particularly bad month for the group. That said, ABB is down around 24% year to date, much worse than its peers despite still-solid business-level performance. With a yield of more than 4%, it might interest bargain hunters and income investors.

Reuben Gregg Brewer owns shares of Eaton. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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