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ABM Industries (ABM) Down 7.81% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for ABM Industries (ABM - Free Report) . Shares have lost nearly 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 its most recent earnings report in order to get a better handle on the important catalysts.
ABM Industries Q4 Earnings in Sync, 2017 View Bullish
ABM recorded relatively modest fourth-quarter fiscal 2016 (ended Oct 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 $29.2 million or $0.51 per share compared with $31.5 million or $0.55 per share in the year-earlier quarter. The year-over-year decrease was primarily due to higher insurance-related expenses and an additional working day in the quarter. However, adjusted earnings matched the Zacks Consensus Estimate.
On a GAAP basis, net income for the reported quarter was $7.8 million or $0.14 per share, significantly down from $38.8 million or $0.68 per share in the year-ago quarter. The year-over-year decline, despite higher revenues, was primarily attributable to $22.5 million impairment charge related to the strategic sale of the Government business. The divested business was an integral part of the Building & Energy Solutions segment and was deemed to be a misfit to the company’s Vision 2020 plan.
For fiscal 2016, ABM recorded GAAP net income of $57.2 million or $1.01 per share compared with $76.3 million or $1.33 per share in fiscal 2015. Adjusted earnings (from continuing operations) for fiscal 2016 were $99.2 million or $1.74 per share compared with $92.9 million or $1.62 per share in fiscal 2015.
Top-Line Improvement
Revenues for the reported quarter increased 3.5% year over year to $1,322.3 million, driven largely by higher work order (tag) sales in the Janitorial segment. Organic growth improved 2.0% 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 $1,327 million. For fiscal 2016, ABM recorded revenues of $5,144.7 million, up 5% year over year.
The quarter reported operating profit of $10.8 million compared with $37.2 million in the year-ago period. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) decreased year over year to $61.5 million from $69.4 million for respective margins of 4.6% and 5.4%.
Segmental Performance
Revenues from Janitorial increased 2.3% year over year to $704.5 million, driven by strong Work Order revenues. Segment operating profit for the reported quarter was down 11.8% year over year to $38.7 million. Revenues from Facility Services were up 0.8% year over year to $149.6 million, while operating profit improved 6.4% to $7.3 million. Revenues from Parking improved 6.8% year over year to $171.6 million, while operating profit from the segment was down 17.9% to $7.0 million. Revenues from Building & Energy Solutions increased 2.9% to $172.5 million, while that from Other segment improved 8.3% year over year to $124.1 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 the fiscal end were $56 million compared with $55.5 million in the prior-year period. Net cash provided by operating activities during the quarter was $8.4 million, compared with $44.0 million in the prior-year period, bringing the tally for fiscal 2016 and fiscal 2015 to $83.5 million and $146.4 million, respectively. ABM ended fiscal 2016 with total debt of $399.2 million.
During the quarter, the company repurchased approximately 0.4 million shares for $15.4 million. As of Oct 31, 2016, ABM had shares worth $141.9 million remaining for repurchase under its $200 million share buyback program. ABM hiked its quarterly dividend by 3% year over year to 17 cents per share. The dividend is payable on Feb 6, 2017 to shareholders on record as of Jan 5 and marks the 203rd consecutive dividend payment by the company.
2017 Guidance
With strong quarterly results and steady progress in its Vision 2020 plan, ABM offered a bullish fiscal-2017 guidance. For the fiscal year, it expects adjusted income from continuing operations in the range of $1.80–$1.90 per share. The company is slated to change its operating segments beginning the first quarter of fiscal 2017 based on its Vision 2020 reorganization.
How Have Estimates Been Moving Since Then?
Since the earnings release last month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
At this time, ABM Industries' stock has a nice Growth score of 'B', though it is lagging slightly on the momentum front with a 'C'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, stocks has an aggregte VGM score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
While the stock has seen one estimate revising upward, there is no change in the magnitude. Notably, shares of ABM have a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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ABM Industries (ABM) Down 7.81% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for ABM Industries (ABM - Free Report) . Shares have lost nearly 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 its most recent earnings report in order to get a better handle on the important catalysts.
ABM Industries Q4 Earnings in Sync, 2017 View Bullish
ABM recorded relatively modest fourth-quarter fiscal 2016 (ended Oct 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 $29.2 million or $0.51 per share compared with $31.5 million or $0.55 per share in the year-earlier quarter. The year-over-year decrease was primarily due to higher insurance-related expenses and an additional working day in the quarter. However, adjusted earnings matched the Zacks Consensus Estimate.
On a GAAP basis, net income for the reported quarter was $7.8 million or $0.14 per share, significantly down from $38.8 million or $0.68 per share in the year-ago quarter. The year-over-year decline, despite higher revenues, was primarily attributable to $22.5 million impairment charge related to the strategic sale of the Government business. The divested business was an integral part of the Building & Energy Solutions segment and was deemed to be a misfit to the company’s Vision 2020 plan.
For fiscal 2016, ABM recorded GAAP net income of $57.2 million or $1.01 per share compared with $76.3 million or $1.33 per share in fiscal 2015. Adjusted earnings (from continuing operations) for fiscal 2016 were $99.2 million or $1.74 per share compared with $92.9 million or $1.62 per share in fiscal 2015.
Top-Line Improvement
Revenues for the reported quarter increased 3.5% year over year to $1,322.3 million, driven largely by higher work order (tag) sales in the Janitorial segment. Organic growth improved 2.0% 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 $1,327 million. For fiscal 2016, ABM recorded revenues of $5,144.7 million, up 5% year over year.
The quarter reported operating profit of $10.8 million compared with $37.2 million in the year-ago period. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) decreased year over year to $61.5 million from $69.4 million for respective margins of 4.6% and 5.4%.
Segmental Performance
Revenues from Janitorial increased 2.3% year over year to $704.5 million, driven by strong Work Order revenues. Segment operating profit for the reported quarter was down 11.8% year over year to $38.7 million. Revenues from Facility Services were up 0.8% year over year to $149.6 million, while operating profit improved 6.4% to $7.3 million. Revenues from Parking improved 6.8% year over year to $171.6 million, while operating profit from the segment was down 17.9% to $7.0 million. Revenues from Building & Energy Solutions increased 2.9% to $172.5 million, while that from Other segment improved 8.3% year over year to $124.1 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 the fiscal end were $56 million compared with $55.5 million in the prior-year period. Net cash provided by operating activities during the quarter was $8.4 million, compared with $44.0 million in the prior-year period, bringing the tally for fiscal 2016 and fiscal 2015 to $83.5 million and $146.4 million, respectively. ABM ended fiscal 2016 with total debt of $399.2 million.
During the quarter, the company repurchased approximately 0.4 million shares for $15.4 million. As of Oct 31, 2016, ABM had shares worth $141.9 million remaining for repurchase under its $200 million share buyback program. ABM hiked its quarterly dividend by 3% year over year to 17 cents per share. The dividend is payable on Feb 6, 2017 to shareholders on record as of Jan 5 and marks the 203rd consecutive dividend payment by the company.
2017 Guidance
With strong quarterly results and steady progress in its Vision 2020 plan, ABM offered a bullish fiscal-2017 guidance. For the fiscal year, it expects adjusted income from continuing operations in the range of $1.80–$1.90 per share. The company is slated to change its operating segments beginning the first quarter of fiscal 2017 based on its Vision 2020 reorganization.
How Have Estimates Been Moving Since Then?
Since the earnings release last month, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter.
ABM Industries Inc. Price and Consensus
ABM Industries Inc. Price and Consensus | ABM Industries Inc. Quote
VGM Scores
At this time, ABM Industries' stock has a nice Growth score of 'B', though it is lagging slightly on the momentum front with a 'C'. However, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile for this investment strategy.
Overall, stocks has an aggregte VGM score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
While the stock has seen one estimate revising upward, there is no change in the magnitude. Notably, shares of ABM have a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 days. Click to get this free report >>