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Bright Near-Term Prospects for Building Maintenance Industry

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The companies grouped under the Building Maintenance Servicescategory provide a wide range of services, including electrical, lighting, cleaning, repair, replacement, heating, ventilation, air-conditioning (HVAC), plumbing, landscaping, and pest control.

Here are the industry’s three major themes:

  • Revenues, income and cash flows have increased over the past several years, enabling industry participants to pay out stable dividends. This is mainly because the companies offer services that consumers generally cannot delay.
  • With the economy reopening and recovering gradually, both manufacturing and non-manufacturing activities have started gathering steam. Thus, the demand environment for maintenance services is expected to get healthier.
  • The construction business, on which the industry is largely dependent upon, is still suffering due the coronavirus pandemic-induced project delays and cancellations. Thus, it is a concern for the industry.

Zacks Industry Rank Indicates Bright Prospects

The Building Products - Maintenance Service industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #50. This rank places it in the top 20% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.

Industry Outperforms the S&P 500 & Sector

Over the past year, the Zacks Building Products - Maintenance Service industry has outperformed the S&P 500 composite as well as the broader sector.

While the industry has gained 22.1%, the broader sector and the S&P 500 composite have rallied 16.7% and 4.6%, respectively.

One-Year Price Performance

Industry’s Current Valuation

Comparing the industry with the S&P 500 composite on the basis of forward 12-month price-to-earnings (P/E), which is a commonly used multiple for the industry, we see that the industry trades at 49.3X, higher than the S&P 500’s 22.8X and the sector’s 29.91X.

Over the past five years, the industry has traded as high as 49.3X, as low as 18.48X and at a median of 29.46X.

Forward 12-month Price-to-Earnings (P/E)

Bottom Line

The impressive demand environment, aided by strong manufacturing and non-manufacturing activities, is likely to be partially offset by weakness in construction activity, at least as long as the coronavirus crisis prevails.

ABM Industries Incorporated (ABM - Free Report) : This New York-based provider of integrated facility solutions currently sports a Zacks Rank 1 (Strong Buy). The Zacks Consensus Estimate for the current-year EPS has improved 24.7% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price and Consensus: ABM

 

Rollins, Inc. (ROL - Free Report) : This Atlanta-based pest and termite control services provider carries a Zacks Rank 2 (Buy). The Zacks Consensus Estimate for current year EPS has improved 20% in the past 60 days.

Price and Consensus: ROL

Team, Inc. (TISI - Free Report) : This Texas-based provider of specialty industrial services carries a Zacks Rank #3 (Hold), at present. The Zacks Consensus Estimate for the ongoing-year EPS has moved up 4.4% over the past 60 days.

Price and Consensus: TISI

ServiceMaster Global Holdings, Inc. : This Memphis-based residential and commercial termite and pest control, restoration, and cleaning services provider also carries a Zacks Rank of 3. The Zacks Consensus Estimate for 2020 EPS has moved 16.7% north in 60 days’ time.

Price and Consensus: SERV

Zacks Top 10 Stocks for 2020

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ABM Industries Incorporated (ABM) - free report >>

Rollins, Inc. (ROL) - free report >>

Team, Inc. (TISI) - free report >>

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