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ABM Industries Incorporated (ABM - Analyst Report) reported strong third quarter fiscal 2013 results (ended July 31, 2013) with net income of $16.1 million or 29 cents per share compared with $12.6 million or 23 cents per share in the year-earlier quarter. Excluding non-recurring items, adjusted earnings for the reported quarter improved to 41 cents per share from 37 cents in the year-ago quarter. The adjusted earnings beat the Zacks Consensus Estimate by 3 cents.

Total revenue increased 12.8% year over year to $1, 216.8 million in the quarter, primarily attributable to accretive acquisitions and organic growth from new sales and expansion of services with existing clients.

Segment Performance

Janitorial: Revenues from the segment increased 3.2% year over year in the quarter to $621.8 million, representing the largest quarterly organic sales improvement in 5 years, largely driven by new significant business wins. However, segment operating profit declined 1.3% to $34.4 million.  

Facility Services: Organic revenues improved 6.3% year over year to $152.8 million, while operating profit increased 21.5% to $7.0 million.

Parking: Revenues from the segment declined 0.6% year over year to $154.0 million during the quarter, although operating profit expanded 4.3% to $8.1 million.

Security: The segment reported revenues of $96.2 million compared with $91.6 million in the year-ago quarter, representing a 5.0% year-over-year increase. Operating profit increased 36.7% to $4.0 million.

Building & Energy Solutions: Revenues from the segment increased 21.6% to $104.9 million, owing to accretive acquisitions and new commercial service and maintenance contracts like bundled energy solutions jobs. Operating profits climbed a stellar 82.5% to $6.7 million with stringent cost-cutting measures and benefits from investments in healthcare vertical and energy businesses.

Adjusted EBITDA improved 14.9% in the reported quarter to $57.2 million, driven by incremental contribution from the recent acquisitions and new businesses.

ABM Industries has a healthy pipeline of future businesses and is particularly going strong in government business. The company expects to continue its bull run in the coming quarters as well with continued healthy margin improvements and seamless integration of acquired businesses. Management also reiterated that corporate restructuring initiatives were well on track to have a sustained long-term growth momentum.

Financial Position

Cash and cash equivalents at quarter-end were $38.7 million. Net cash from operations was $46.5 million for the reported quarter compared with $28.3 million in the prior-year period. This enabled the company to reduce its outstanding debt under its credit facility by $36 million to $348 million.  

Outlook

Banking on the strong quarterly results, ABM Industries narrowed its guidance for fiscal 2013 and now anticipates income from continuing operations to be in the range of $1.26 to $1.31 per share compared with earlier projections of $1.21 to $1.31 a share. Adjusted income is expected to be in the range of $1.45 to $1.50 per share compared with previous expectations of $1.40 to $1.50.

ABM Industries’ strategy entails growth through acquisitions. The company expects to extend its global footprint as well as strengthen its position in existing markets through successful integration of these companies and organic growth across the industry verticals.

ABM Industries presently has a Zacks Rank #3 (Hold). Other players in the industry that warrant a look include AMN Healthcare Services Inc. (AHS - Snapshot Report), CTPartners Executive Search Inc. (CTP - Snapshot Report) and Insperity, Inc. (NSP - Snapshot Report), each carrying Zacks Rank #2 (Buy).

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