Back to top

Analyst Blog

ABM Industries Incorporated (ABM - Analyst Report) has entered into an agreement to acquire Air Serv Corporation for approximately $158 million in cash. The transaction is expected to be slightly accretive to ABM’s earnings in fiscal 2013 and to contribute significantly in the future. The transaction, pursuant to customary closing conditions, is expected to close next month.

Air Serv is a leading provider of integrated facility management services for the world's leading airlines and freight companies at airports across the United States and United Kingdom. It generates annual revenues of approximately $300 million and employs around 12,000 employees globally and provides a variety of janitorial, passenger, security services and transportation services. Air Serv is the global leader in wheelchair, baggage handling and skycap services. 
 
The combined entity will significantly expand ABM's capabilities in meeting the end-to-end needs of the airlines and airport authorities and is expected to generate over $650 million in annual revenues. This acquisition will augment ABM’s aviation capabilities and position the company as the industry leader in this space. 
 
In the recently reported third-quarter fiscal 2012, ABM posted adjusted earnings of 37 cents per share, falling short of the Zacks Consensus Estimate of 42 cents as well as the year-ago quarter earnings of 51 cents per share. 
 
Total revenue remained flat year over year at $1.08 billion, missing the Zacks Consensus Estimate of $1.09 billion. Contract cancellations of government-related businesses in the Facility Solutions segment negatively impacted the results. 
 
The acquisition will enhance ABM’s international footprint and Air Serv’s U.K operations will serve as a base for expanding ABM’s in other services as well. However, the dearth of government contracts as well as weak global economic condition will weigh on the margins going forward. Moreover, as the company’s Facility Solution segment depends heavily on government contracts, any further cancellation of these contracts would have a negative impact on its revenues.
 
ABM retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on the stock.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
ERBA DIAGNO… ERB 3.80 +7.04%
BANCO DO BR… BDORY 14.74 +5.66%
AIR INDUSTR… AIRI 9.99 +4.15%
EQT MIDSTRE… EQM 98.14 +3.38%
WEATHERFORD… WFT 23.64 +3.10%