ABM Industries Incorporated (ABM Quick QuoteABM - Free Report) is benefiting from ELEVATE initiatives, strong liquidity, and its commitment to dividends and share repurchases. The company’s shares have gained 9% over the past year.

ABM’s Tailwinds

ABM has consistently committed to rewarding shareholders through dividends and share buybacks. In fiscal years 2022, 2023 and 2024, the company distributed $51.9 million, $57.5 million and $56.5 million in dividends, respectively. Additionally, it returned $97.5 million, $138.1 million and $56.1 million through share repurchases in fiscal 2022, 2023 and 2024, respectively.

These actions reflect ABM's dedication to enhancing shareholder value and its confidence in the business's long-term potential. The company’s robust cash position supports these initiatives. ABM generated $169 million in free cash flow in 2024 compared to the $194 million generated in fiscal 2023.

At the end of the last reported quarter, ABM’s current ratio (a measure of liquidity) was pegged at 1.52, higher than the industry’s 1.24. This strong liquidity reflects ABM’s ability to cover its immediate liabilities without strain, indicating financial stability and operational flexibility.

The company's multi-year comprehensive strategic plan, ELEVATE, focuses on providing clients with offerings that enhance transparency and efficiencies, developing its own talent management system capabilities, expanding data usage and modernizing the digital ecosystem. ELEVATE is expected to significantly accelerate ABM’s organic growth, improve its strategic and comprehensive positioning and reinforce profitability.

The 2022 acquisition of RavenVolt is part of ABM’s ELEVATE strategy that focuses on expanding the company’s footprint in potential geographies and end markets through strategic acquisitions. RavenVolt’s addition is expanding the company’s Technical Solutions service offerings, strengthening its foothold in EV infrastructure, power and bundled energy solutions markets. RavenVolt also boosts ABM’s eMobility business as a provider of customized power solutions in facilities that require additional power generation capacity to support EV charging.

The 2024 acquisition of Quality Uptime is expected to significantly boost ABM’s mission-critical-related revenues by increasing artificial intelligence and related investments in data center infrastructure.

Some Risks

ABM operates in a competitive market and encounters challenges related to customer retention, wage inflation, and labor availability. Difficulties in retaining customers could result in revenue losses. Customer retention issues could lead to revenue losses, increased marketing and sales costs to acquire new clients and potential disruptions in long-term growth. Rising wages, particularly in a labor-intensive industry like ABM's, can directly impact its operating margins.

A significant portion of ABM’s workforce is unionized, which introduces additional complexities in labor management. If future collective bargaining negotiations do not go as planned, ABM could face increased labor costs or operational disruptions. In such cases, there may also be reputational risks and strained relationships with key clients.

Zacks Rank & Stocks to Consider

ABM carries a Zacks Rank #3 (Hold) at present.

Some better-ranked stocks from the broader Zacks Business Services sector are UiPath (PATH Quick QuotePATH - Free Report) and Limbach Holdings, Inc. (LMB Quick QuoteLMB - Free Report) , each carrying a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

UiPath has a long-term earnings growth expectation of 19%. PATH delivered a trailing four-quarter earnings surprise of 36.4%, on average.

Limbach Holdingshas a long-term earnings growth expectation of 12%. LMB delivered a trailing four-quarter earnings surprise of 42.3%, on average.