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ABM Industries Hits a 52-Week High on Multiple Initiatives

ABM EXPO LOCK TRU

Trades from $3

Shares of leading provider of facility solutions ABM Industries Inc. (ABM - Free Report) scaled a new 52-week high of $43.71 on Nov 15, highlighting a solid year-to-date return of 53.1%. Barring minor hiccups, the company’s share price has been on an uptrend since the beginning of this year.

Despite the strong price appreciation, this Zacks Rank #3 (Hold) stock has the fundamentals to scale higher. The stock is currently trading at a forward P/E of 23.1x and has long-term earnings growth expectation of 8%.

Growth Drivers

Over the years, ABM has developed a platform to deliver an end-to-end service model to its clients by realigning its operational structure into an on-site, mobile and on-demand market based structure. This realignment has improved its long-term growth prospects and has opened up higher margin opportunities by enabling it to better deliver end-to-end services to its clients across urban, suburban and rural areas. The company further expects to extend its global footprint and strengthen its position in the existing markets through both inorganic and organic means across the industry verticals.

ABM INDUSTRIES Price and Consensus

 

ABM INDUSTRIES Price and Consensus | ABM INDUSTRIES Quote

In order to fuel its growth momentum, ABM has embarked on a Vision 2020 plan that outlines its vision for the next five years. The plan has three primary phases, the first 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 from 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 continuous focus on additional cost savings.

ABM has successfully completed the first phase of the Vision 2020 plan. The company 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.

ABM’s comprehensive and transformative initiatives are focused on driving sustainable profitability by effectively allocating resources to high-margin services and business verticals with a strong competitive edge. Management also disclosed that corporate restructuring initiatives are well on track to yield sustained long-term growth momentum. The company’s recent inclusion in the Fortune 500 list raises its goodwill in the industry and augments its position in the market.

All these measures for a relatively healthy growth impetus for the near future probably raised investor confidence and drove the shares to a 52-week high.

Stocks to Consider

Some better-ranked stocks in the industry include LifeLock, Inc. (LOCK - Free Report) , TransUnion (TRU - Free Report) and Exponent Inc. (EXPO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LifeLock is currently trading at a forward P/E of 44.3x and has beaten estimates thrice over the trailing four quarters, for an average earnings surprise of 27.4%.

TransUnion has a long-term earnings growth expectation of 12.8% and is currently trading at a forward P/E of 22.7x.

Exponent has a long-term earnings growth expectation of 12.0% and is currently trading at a forward P/E of 40.1x.

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