ABM Industries Beats Estimates

ABM Industries (ABM - Analyst Report) reported fiscal third quarter earnings of 36 cents per share, beating the Zacks Consensus Estimate of 34 cents per share and 16% higher that the prior year earnings of 31 cents per share.

Despite lower year-over-year revenues in all the four segments, ABM managed to post higher profits in the quarter through stringent cost control measures.

Total revenue in the quarter was down 5.7% at $870.6 million. The company’s sales are directly dependent on commercial real estate occupancy levels. The economic slowdown has resulted in declining commercial office building occupancy and rental rates, which in turn has reduced demand and created pricing pressures for building maintenance and other services provided by ABM.

The Janitorial segment’s revenue dropped 6.8% in the quarter and 4.1% year-to-date due to reductions in the level and scope of services provided to its customers, contract price compression and a decline in the level of tag work as a result of customer discretionary spending.

In the Parking segment, third quarter and year-to-date revenue fell 4.3% and 3.5% respectively, as airline traffic and consumer spending have slowed substantially due to the economic downturn.

Quarterly revenue in the Engineering segment was down 4.8%, while year-to-date revenue declined 7.3%. The weakness in commercial construction activity has dampened the segment’s growth since the beginning of the fiscal year. Even the Security segment, which posted higher revenues in the first two quarters of fiscal 2009, reported a 1.0% drop in revenue in the reported quarter.
 
Despite the adverse impact of the weak economic conditions on its revenue, ABM continues to post strong operating profits. The company continues to drive profits through aggressive cost containment, successful integration of acquisitions, and elimination of less profitable businesses.

ABM reiterated its full-year earnings guidance in the range of $1.25 to $1.35 per share, compared to $1.10 reported in fiscal 2008.

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