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ABM Industries (ABM) Misses on Q1 Earnings, Raises Guidance

Zacks Equity Research
Updated

Business services provider ABM Industries Incorporated ABM recorded first-quarter fiscal 2018 (ended Jan 31, 20178) net income from continuing operations of $28 million or 42 cents per share compared with $16.1 million or 28 cents per share in the year-earlier quarter. The year-over-year increase was primarily attributable to income tax benefit.

Adjusted earnings (from continuing operations) for the reported quarter were $17.4 million or 26 cents per share compared with $21.5 million or 38 cents per share in the year-ago quarter. The year-over-year decrease in adjusted earnings was largely due to interest expenses, amortization and higher share count. Adjusted earnings for the quarter missed the Zacks Consensus Estimate by 2 cents.

Top-Line Improvement

Revenues for the reported quarter increased 19.7% year over year to $1,588.3 million, largely driven by organic and inorganic growth. Organic growth improved 3% year over year while acquisitions contributed $253.9 million of incremental revenues during the quarter related to the GCA Services buyout. Organic growth in the Aviation segment was driven by higher passenger services, cabin cleaning, parking, catering and transportation services for new and existing customers. Organic growth in the Business & Industry segment was led by higher janitorial and facility services revenues. Quarterly revenues exceeded the Zacks Consensus Estimate of $1,572 million.

ABM Industries Incorporated Price, Consensus and EPS Surprise

 

ABM Industries Incorporated Price, Consensus and EPS Surprise | ABM Industries Incorporated Quote

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Operating profit declined to $19.5 million from $23.8 million in the year-ago period, owing to higher operating expenses. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter increased to $65.1 million from $48.1 million in the year-earlier quarter for respective margins of 4.1% and 3.6% owing to the newly-acquired GCA business, revenue contribution and higher procurement savings.

Financial Position

Cash and cash equivalents at quarter end were $68.6 million while total debt was $1.3 billion. Net cash from operating activities was $33.7 million compared with cash utilization of $11.1 million in the year-ago period.

Guidance Raised

ABM raised its guidance for fiscal 2018 due to the favorable impact of the U.S. Tax Cuts and Jobs Act. GAAP income from continuing operations is expected to be within $1.88 to $1.98 per share compared with earlier range of $1.33-$1.43. Adjusted income from continuing operations is anticipated to be in the range of $2.00 to $2.10, up from $1.70 to $1.80 per share expected earlier.

Going Forward

ABM’s comprehensive, strategic and transformation initiative is focused on driving sustainable profitability by effectively allocating resources to higher margin services and business verticals with a strong competitive edge. We expect this to fuel the company’s growth momentum in the coming quarters.

ABM has a Zacks Rank #2 (Buy). Other stocks worth considering in the industry include CBIZ, Inc. CBZ, Exponent, Inc. EXPO and ServiceMaster Global Holdings, Inc. SERV, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CBIZ has beaten earnings estimates thrice in the trailing four quarters with a positive surprise of 75.1%.

Exponent has topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 12.4%.

ServiceMaster Global topped estimates twice in the trailing four quarters with an average positive earnings surprise of 3%.

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ABM Industries Incorporated (ABM) : Free Stock Analysis Report
 
ServiceMaster Global Holdings, Inc. (SERV) : Free Stock Analysis Report
 
CBIZ, Inc. (CBZ) : Free Stock Analysis Report
 
Exponent, Inc. (EXPO) : Free Stock Analysis Report
 
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