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ABM Industries (ABM) Beats on Q3 Earnings, Raises View
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Business services provider ABM Industries Incorporated (ABM - Free Report) recorded solid third-quarter fiscal 2016 (ended Jul 31, 2016) results on the back of healthy revenues across most of the operating segments. Adjusted earnings (from continuing operations) for the reported quarter were $30.6 million or 54 cents per share compared with $24.2 million or 42 cents per share in the year-earlier quarter. The year-over-year increase was primarily due to lower insurance-related expenses, higher revenues from the Janitorial and ABES businesses and a less working day in the quarter. Adjusted earnings for quarter comprehensively beat the Zacks Consensus Estimate of 38 cents.
On a GAAP basis, net income for the reported quarter was $31.1 million or 55 cents per share, significantly up from $1.5 million or 3 cents per share in the year-ago quarter. The year-over-year improvement in GAAP earnings, despite higher operating expenses, was primarily attributable to higher revenues and savings related to Vision 2020 initiatives.
Improvement in Revenues
Revenues for the reported quarter increased 3.8% year over year to $1,296.9 million, driven largely by higher work order (tag) sales and a solid ABES (Technical Services) business. Organic growth improved 2.2% year over year, while inorganic growth added $19.3 million of incremental revenues during the quarter, primarily related to the Westway acquisition in the U.K. (reflected in the Building & Energy Solutions segment). Quarterly revenues, however, missed the Zacks Consensus Estimate of $1,312 million.
The quarter reported operating profit of $18.5 million as against operating loss of $7.6 million in the year-ago period. Adjusted EBITDA increased year over year to $61.1 million from $49.1 million for respective margins of 4.7% and 3.9%.
Revenues from Janitorial increased 2% year over year to $691.8 million, driven by strong Work Order revenues. Segment operating profit for the reported quarter was up 33.3% year over year to $43.8 million.
Revenues from Facility Services were down 0.8% year over year to $146.2 million, while operating profit improved 31.7% to $7.9 million.
Revenues from Parking improved 3.5% year over year to $167.7 million, while operating profit from the segment was down 2.1% to $7.6 million.
Revenues from Building & Energy Solutions increased 12.5% to $167.8 million, while that from Other segment improved 9.3% year over year to $123.5 million.
Business Restructuring Update
ABM has embarked on a Vision 2020 plan that outlines its prospects for the next five years. The plan hinges on three primary phases, the first of which is aimed at increasing the efficiency of the company through diligent execution of the operating plan and stringent cost-reduction activities.
The second phase will focus on driving growth across the realigned verticals through effective realization of cost savings by way of procurement, account management and other organizational changes. The final phase of the transformation will include accelerated growth impetus from the vertical alignment and account planning systems with a focus on additional cost savings.
ABM is currently focusing on the second phase of the plan and remains confident of achieving $40–$50 million in savings through operational efficiencies by the end of 2017.
Financial Position
Cash and cash equivalents at quarter end were $51.6 million. Net cash provided by operating activities during the quarter was $16.9 million, compared with $62.4 million in the prior-year period. ABM ended the quarter with total debt of $357 million.
During the quarter, the company repurchased approximately 0.3 million shares for $9.7 million. As of Jul 31, 2016, ABM had shares worth $157.3 million remaining for repurchase under its $200 million share buyback program.
Updated Guidance
With strong quarterly results and steady progress in its Vision 2020 plan, ABM updated its fiscal 2016 guidance. For fiscal 2016, ABM currently expects adjusted income from continuing operations in the range of $1.70–$1.75, up from $1.55–$1.65 expected earlier. The increased guidance is primarily due to the recognition of certain discrete tax items and higher-than-expected 2020 Vision savings.
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.
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ABM Industries (ABM) Beats on Q3 Earnings, Raises View
Business services provider ABM Industries Incorporated (ABM - Free Report) recorded solid third-quarter fiscal 2016 (ended Jul 31, 2016) results on the back of healthy revenues across most of the operating segments. Adjusted earnings (from continuing operations) for the reported quarter were $30.6 million or 54 cents per share compared with $24.2 million or 42 cents per share in the year-earlier quarter. The year-over-year increase was primarily due to lower insurance-related expenses, higher revenues from the Janitorial and ABES businesses and a less working day in the quarter. Adjusted earnings for quarter comprehensively beat the Zacks Consensus Estimate of 38 cents.
On a GAAP basis, net income for the reported quarter was $31.1 million or 55 cents per share, significantly up from $1.5 million or 3 cents per share in the year-ago quarter. The year-over-year improvement in GAAP earnings, despite higher operating expenses, was primarily attributable to higher revenues and savings related to Vision 2020 initiatives.
Improvement in Revenues
Revenues for the reported quarter increased 3.8% year over year to $1,296.9 million, driven largely by higher work order (tag) sales and a solid ABES (Technical Services) business. Organic growth improved 2.2% year over year, while inorganic growth added $19.3 million of incremental revenues during the quarter, primarily related to the Westway acquisition in the U.K. (reflected in the Building & Energy Solutions segment). Quarterly revenues, however, missed the Zacks Consensus Estimate of $1,312 million.
The quarter reported operating profit of $18.5 million as against operating loss of $7.6 million in the year-ago period. Adjusted EBITDA increased year over year to $61.1 million from $49.1 million for respective margins of 4.7% and 3.9%.
ABM INDUSTRIES Price, Consensus and EPS Surprise
ABM INDUSTRIES Price, Consensus and EPS Surprise | ABM INDUSTRIES Quote
Segmental Performance
Revenues from Janitorial increased 2% year over year to $691.8 million, driven by strong Work Order revenues. Segment operating profit for the reported quarter was up 33.3% year over year to $43.8 million.
Revenues from Facility Services were down 0.8% year over year to $146.2 million, while operating profit improved 31.7% to $7.9 million.
Revenues from Parking improved 3.5% year over year to $167.7 million, while operating profit from the segment was down 2.1% to $7.6 million.
Revenues from Building & Energy Solutions increased 12.5% to $167.8 million, while that from Other segment improved 9.3% year over year to $123.5 million.
Business Restructuring Update
ABM has embarked on a Vision 2020 plan that outlines its prospects for the next five years. The plan hinges on three primary phases, the first of which is aimed at increasing the efficiency of the company through diligent execution of the operating plan and stringent cost-reduction activities.
The second phase will focus on driving growth across the realigned verticals through effective realization of cost savings by way of procurement, account management and other organizational changes. The final phase of the transformation will include accelerated growth impetus from the vertical alignment and account planning systems with a focus on additional cost savings.
ABM is currently focusing on the second phase of the plan and remains confident of achieving $40–$50 million in savings through operational efficiencies by the end of 2017.
Financial Position
Cash and cash equivalents at quarter end were $51.6 million. Net cash provided by operating activities during the quarter was $16.9 million, compared with $62.4 million in the prior-year period. ABM ended the quarter with total debt of $357 million.
During the quarter, the company repurchased approximately 0.3 million shares for $9.7 million. As of Jul 31, 2016, ABM had shares worth $157.3 million remaining for repurchase under its $200 million share buyback program.
Updated Guidance
With strong quarterly results and steady progress in its Vision 2020 plan, ABM updated its fiscal 2016 guidance. For fiscal 2016, ABM currently expects adjusted income from continuing operations in the range of $1.70–$1.75, up from $1.55–$1.65 expected earlier. The increased guidance is primarily due to the recognition of certain discrete tax items and higher-than-expected 2020 Vision savings.
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 currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include CBIZ, Inc. (CBZ - Free Report) , Navigant Consulting Inc. (NCI - Free Report) and The Hackett Group, Inc. (HCKT - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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