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Here's Why You Should Hold ABM Stock in Your Portfolio Now
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Key Takeaways
ABM stock jumped 28.2% in six months, with FY26 revenues and EPS projected to grow 5.3% and 16.3% y/y.
High-growth infrastructure revenues rose 26% organically, while WGNSTAR added $76.9M in FY26.
ABM raised its FY26 free cash flow guidance to $210M, but debt and market softness pose risks.
ABM (ABM - Free Report) stock has gained 28.2% over the past six months, outpacing the industry's 2.4% dip. The Zacks S&P 500 Composite has rallied 12.4% over the same period.
6-Month Share Price Performance
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for ABM’s fiscal 2026 revenues is $9.2 billion, implying 5.3% year-over-year growth. For fiscal 2027, the anticipated growth rate is 3%.
The consensus mark for earnings per share (EPS) for fiscal 2026 is pinned at $4, suggesting a 16.3% year-over-year jump. The bottom line is expected to increase 7.5% to $4.3 in fiscal 2027.
Factors That Augur Well for ABM’s Success
Footprints in High-Growth Infrastructure Markets: ABM is raising exposure to semiconductor, microgrid and data center markets. In the first nine months of fiscal 2026, these businesses generated nearly $775 million in revenues, representing more than 11% of the company’s top line. Revenues increased 26% organically year over year and about 40% including WGNSTAR, with double-digit blended operating margins. Semiconductor revenues rose 65% organically year over year, microgrids increased 17% and data centers grew 8%.
WGNSTAR Strengthens Semiconductor Capabilities: The WGNSTAR buyout contributed $76.9 million to revenues in the first nine months of fiscal 2026 after closing in February. Client-base expansions and the WGNSTAR acquisition resulted in M&D revenues increasing 17.6% year over year in the fiscal third quarter, comprising 7.8% organic growth and 9.9% acquisition-related growth.
Financial Flexibility: The free cash flow (FCF) was $199.6 million in the first nine months of fiscal 2026 compared with $42.4 million in the prior-year period, driven by improved working-capital management and ERP stabilization. Management increased the fiscal 2026 reported FCF guidance to $210 million from the previously provided $185 million. Leverage lowered sequentially to 2.9X in the fiscal third quarter from 3.2X in the second quarter, reaching the company’s below-3X target one quarter earlier than planned.
Risks Faced by ABM
Macroeconomic Headwinds Could Limit Growth: ABM remains exposed to commercial real estate conditions and airline economics. Business & Industry revenues declined 2.6% year over year in the third quarter of fiscal 2026, reflecting the large U.K. client exit and continued West Coast softness. Management anticipates the revenue trend to persist in the fourth quarter and does not expect the segment to return to organic growth until around mid-fiscal 2027.
Higher Debt Lowers Flexibility: ABM ended the third quarter of fiscal 2026 with $1.8 billion in total borrowings, although this increased sequentially from $1.9 billion in the second quarter. Interest expenses increased year over year to $29.5 million from $25.3 million in the fiscal third quarter, reflecting higher average debt following WGNSTAR. For the first nine months, interest expenses increased 13.2% year over year to $81.6 million from $72.1 million.
ABM’s Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
View the Zacks #1 Rank List
Image: Shutterstock
Here's Why You Should Hold ABM Stock in Your Portfolio Now
Key Takeaways
ABM (ABM - Free Report) stock has gained 28.2% over the past six months, outpacing the industry's 2.4% dip. The Zacks S&P 500 Composite has rallied 12.4% over the same period.
6-Month Share Price Performance
The Zacks Consensus Estimate for ABM’s fiscal 2026 revenues is $9.2 billion, implying 5.3% year-over-year growth. For fiscal 2027, the anticipated growth rate is 3%.
The consensus mark for earnings per share (EPS) for fiscal 2026 is pinned at $4, suggesting a 16.3% year-over-year jump. The bottom line is expected to increase 7.5% to $4.3 in fiscal 2027.
Factors That Augur Well for ABM’s Success
Footprints in High-Growth Infrastructure Markets: ABM is raising exposure to semiconductor, microgrid and data center markets. In the first nine months of fiscal 2026, these businesses generated nearly $775 million in revenues, representing more than 11% of the company’s top line. Revenues increased 26% organically year over year and about 40% including WGNSTAR, with double-digit blended operating margins. Semiconductor revenues rose 65% organically year over year, microgrids increased 17% and data centers grew 8%.
WGNSTAR Strengthens Semiconductor Capabilities: The WGNSTAR buyout contributed $76.9 million to revenues in the first nine months of fiscal 2026 after closing in February. Client-base expansions and the WGNSTAR acquisition resulted in M&D revenues increasing 17.6% year over year in the fiscal third quarter, comprising 7.8% organic growth and 9.9% acquisition-related growth.
Financial Flexibility: The free cash flow (FCF) was $199.6 million in the first nine months of fiscal 2026 compared with $42.4 million in the prior-year period, driven by improved working-capital management and ERP stabilization. Management increased the fiscal 2026 reported FCF guidance to $210 million from the previously provided $185 million. Leverage lowered sequentially to 2.9X in the fiscal third quarter from 3.2X in the second quarter, reaching the company’s below-3X target one quarter earlier than planned.
Risks Faced by ABM
Macroeconomic Headwinds Could Limit Growth: ABM remains exposed to commercial real estate conditions and airline economics. Business & Industry revenues declined 2.6% year over year in the third quarter of fiscal 2026, reflecting the large U.K. client exit and continued West Coast softness. Management anticipates the revenue trend to persist in the fourth quarter and does not expect the segment to return to organic growth until around mid-fiscal 2027.
Higher Debt Lowers Flexibility: ABM ended the third quarter of fiscal 2026 with $1.8 billion in total borrowings, although this increased sequentially from $1.9 billion in the second quarter. Interest expenses increased year over year to $29.5 million from $25.3 million in the fiscal third quarter, reflecting higher average debt following WGNSTAR. For the first nine months, interest expenses increased 13.2% year over year to $81.6 million from $72.1 million.
ABM’s Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader Zacks Business Services sector include WEX (WEX - Free Report) and Concentrix (CNXC - Free Report) .These two companies presently have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
WEX has a long-term earnings growth expectation of 11.3%. WEX delivered a trailing four-quarter earnings surprise of 4.3%, on average.
Concentrix has a long-term earnings growth expectation of 5.4%. CNXC delivered a trailing four-quarter earnings surprise of 1.9%, on average.