...End-Markets Under Pressure: ABB Ltd's revenue and earnings continue to be affected by its large exposure to oil and gas and mining markets and its above-average exposure to emerging markets (EMs) in Fitch Ratings' portfolio of rated capital goods companies. Fitch expects the oil and gas sector to remain challenged in 2016 and does not believe that the cycle has yet reached its low point, for either upstream or downstream oil and gas. The EM contribution has increased to close to 50% of total revenues from 42% in 2006. The slowdown in China, one of ABB's largest markets after the US, is putting more pressure on the company's financial profile than previously anticipated, with base orders declining 14% in 2015. Modest Improvement in Profitability: Fitch expects ABB's operating profit to be below that of capital goods peers, which have higher exposure to more stable consumer spending and healthcare markets. However, we project a modest improvement in the EBITDA margin, backed by continued...
