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ABM Industries (ABM) Down 7.8% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for ABM Industries Incorporated (ABM - Free Report) . Shares have lost about 7.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 recorded solid second-quarter fiscal 2017 (ended Apr 30, 2017) results on the back of revenue improvements across most of the operating segments. Adjusted earnings (from continuing operations) for the reported quarter were $27.8 million or $0.49 per share compared with $17.7 million or $0.31 per share in the year-ago quarter. Adjusted earnings for the quarter beat the Zacks Consensus Estimate by $0.06.
On a GAAP basis, net income for the reported quarter was $31.3 million or $0.55 per share compared with $4.4 million or $0.08 per share in the year-earlier quarter. The year-over-year increase was primarily attributable to top-line growth and impairment recovery related to the Government Services business.
Top-Line Improvement
Revenues for the reported quarter increased 4.2% year over year to $1,310.5 million, largely driven by growth in the Aviation segment due to new businesses from existing clients. Rise in revenues from the Aviation segment were driven by higher passenger services, cabin cleaning, and parking and transportation services with new and existing customers. Organic growth improved 3.6% year over year, while acquisitions contributed $8.7 million of incremental revenues during the quarter. Quarterly revenues exceeded the Zacks Consensus Estimate of $1,308 million.
Operating profit improved to $51.0 million from $11.8 million in the year-ago period, owing to higher revenue contribution and organizational savings due to the Vision 2020 plan. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter increased to $60.5 million from $46.0 million in the year-earlier quarter for respective margins of 4.6% and 3.7%.
Financial Position
Cash and cash equivalents at the quarter end were $55.7 million with total debt aggregating $406.8 million. Net cash provided by operating activities during the quarter was $59.3 million compared with $86.3 million in the prior-year period.
During the quarter, the company did not repurchase any shares under its share repurchase program. As of Apr 30, 2017, ABM had shares worth $134.1 million remaining for repurchase under its $200 million share buyback program.
Divesture of Government Services Business
Subsequent to the quarter end, ABM completed the sale of the Government Services business to an affiliate of Valiant Integrated Services for pre-tax proceeds of $35.5 million. The company recorded an impairment recovery of $17.4 million during the quarter for the transaction.
Fiscal 2017 Guidance Raised
With strong quarterly results and steady progress in its Vision 2020 plan and lower-than-expected overhead expenses, ABM raised its fiscal 2017 guidance. For the fiscal year, it expects adjusted income from continuing operations in the range of $1.85–$1.95 per share, up from the earlier projection of $1.80–$1.90. GAAP income from continuing operations is expected within $1.63–$1.73 per share, significantly up from $1.40–$1.50 anticipated earlier.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
At this time, ABM Industries' stock has a great Growth Score of 'A', though it is lagging a bit on the momentum front with a 'B'. Following the exact same course, the stock was allocated also a grade of 'B' on the value side, putting it in the second quintile 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 more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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ABM Industries (ABM) Down 7.8% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for ABM Industries Incorporated (ABM - Free Report) . Shares have lost about 7.8% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 Beats Q2 Earnings, Raises FY17 View
ABM recorded solid second-quarter fiscal 2017 (ended Apr 30, 2017) results on the back of revenue improvements across most of the operating segments. Adjusted earnings (from continuing operations) for the reported quarter were $27.8 million or $0.49 per share compared with $17.7 million or $0.31 per share in the year-ago quarter. Adjusted earnings for the quarter beat the Zacks Consensus Estimate by $0.06.
On a GAAP basis, net income for the reported quarter was $31.3 million or $0.55 per share compared with $4.4 million or $0.08 per share in the year-earlier quarter. The year-over-year increase was primarily attributable to top-line growth and impairment recovery related to the Government Services business.
Top-Line Improvement
Revenues for the reported quarter increased 4.2% year over year to $1,310.5 million, largely driven by growth in the Aviation segment due to new businesses from existing clients. Rise in revenues from the Aviation segment were driven by higher passenger services, cabin cleaning, and parking and transportation services with new and existing customers. Organic growth improved 3.6% year over year, while acquisitions contributed $8.7 million of incremental revenues during the quarter. Quarterly revenues exceeded the Zacks Consensus Estimate of $1,308 million.
Operating profit improved to $51.0 million from $11.8 million in the year-ago period, owing to higher revenue contribution and organizational savings due to the Vision 2020 plan. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter increased to $60.5 million from $46.0 million in the year-earlier quarter for respective margins of 4.6% and 3.7%.
Financial Position
Cash and cash equivalents at the quarter end were $55.7 million with total debt aggregating $406.8 million. Net cash provided by operating activities during the quarter was $59.3 million compared with $86.3 million in the prior-year period.
During the quarter, the company did not repurchase any shares under its share repurchase program. As of Apr 30, 2017, ABM had shares worth $134.1 million remaining for repurchase under its $200 million share buyback program.
Divesture of Government Services Business
Subsequent to the quarter end, ABM completed the sale of the Government Services business to an affiliate of Valiant Integrated Services for pre-tax proceeds of $35.5 million. The company recorded an impairment recovery of $17.4 million during the quarter for the transaction.
Fiscal 2017 Guidance Raised
With strong quarterly results and steady progress in its Vision 2020 plan and lower-than-expected overhead expenses, ABM raised its fiscal 2017 guidance. For the fiscal year, it expects adjusted income from continuing operations in the range of $1.85–$1.95 per share, up from the earlier projection of $1.80–$1.90. GAAP income from continuing operations is expected within $1.63–$1.73 per share, significantly up from $1.40–$1.50 anticipated earlier.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been two revisions 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 Industries' stock has a great Growth Score of 'A', though it is lagging a bit on the momentum front with a 'B'. Following the exact same course, the stock was allocated also a grade of 'B' on the value side, putting it in the second quintile 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 more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.