ABM Industries Incorporated (ABM - Free Report) is benefitting from systematic and strategic plans which are likely to drive long-term profits on the back of an industry-based go-to-market approach.
Shares of the company have gained 3.7% in the past six months, against the industry’s decline of 0.2%. With a market cap of $2 billion, ABM Industries is a stock that investors should retain in their portfolio now.
Let’s take a look at the factors that bode well for the company.
2020 Vision: Outlining Growth Prospects for the Next Five Years
ABM Industries’ 2020 Vision outlines its long-term vision for the next five years and is contingent on three primary phases, the first of which is aimed to increase the efficiency of the company through diligent execution of the operating plan and stringent cost-reduction activities. The second phase is focused on driving growth across the realigned verticals on the back of effective realization of the cost savings from procurement, account management and other organizational changes. Based on the benefits from the first two phases, the final phase of the transformation will include accelerated growth impetus from the vertical alignment and account planning systems with focus on additional cost savings. ABM Industries is currently focusing on the second phase of the plan.
Realignment of Operational Structure
The company has launched a platform to deliver an end-to-end service model to clients by reorganizing operational structure to an on-site, mobile and on-demand market-based structure. The realignment has improved long-term growth prospects and has provided higher margin opportunities by enabling it to deliver end-to-end services to clients across urban, suburban and rural areas more effectively. The company expects to extend global footprint and strengthen position in existing markets on the back of inorganic and organic growth across the industry verticals.
Consistent Rewards to Shareholders
ABM Industries’ consistent efforts in rewarding shareholders through dividend payments and share repurchases are positives. In the first nine months of fiscal 2018, the company returned $34.5 million of dividend payments to shareholders. However, no share repurchases were done in the said period.
In 2017, it paid $39.5 million in dividend and repurchased shares worth $7.9 million. In 2016, the company returned $36.9 million through dividend payment and $46.6 million through share buyback. In 2015, $36 million of dividend was paid and shares worth $31.4 million were repurchased. Such moves indicate the company’s commitment to create value for shareholders and underline confidence in its business.
In spite of riding on significant growth prospects, ABM Industries is not free from headwinds. It has a debt-laden balance sheet that may limit future expansion and worsen its risk profile. Moreover, escalating expenses are likely to weigh on the bottom line. Nevertheless, prudent strategic plans of actions under 2020 Vision will boost long-term profits.
Zacks Rank & Stocks to Consider
Currently, ABM Industries carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader Business Services sector include Automatic Data Processing, Inc. (ADP - Free Report) , BG Staffing, Inc. (BGSF - Free Report) and Robert Half International Inc. (RHI - Free Report) , each carrying a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for Automatic Data Processing, BG Staffing and Robert Half International is 12.5%, 20%, and 13.3%, respectively.
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