ABM Industries (ABM) Down 8% Since Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for ABM Industries Incorporated ABM. Shares have lost about 8% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is ABM due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ABM Industries Misses on Q1 Earnings, Raises Guidance

ABM recorded first-quarter fiscal 2018 (ended Jan 31, 2018) net income from continuing operations of $28 million or 42 cents per share compared with $16.1 million or 28 cents 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.

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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

ABM Industries Incorporated Price and Consensus

 

ABM Industries Incorporated Price and Consensus | ABM Industries Incorporated Quote

VGM Scores

At this time, ABM has a great Growth Score of A, though it is lagging a lot on the momentum front with a C. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is primarily suitable for growth investors while also being suitable for those looking for value and to a lesser degree momentum.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. It's no surprise that ABM has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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