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Why Is ABM Industries (ABM) Up 13.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for ABM Industries (ABM - Free Report) . Shares have added about 13.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ABM Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ABM Industries Tops Q4 Earnings & Revenues Estimates

ABM Industries reported strong fourth-quarter fiscal 2018 results wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings (from continuing operations) of 58 cents per share surpassed the Zacks Consensus Estimate by a penny and increased 56.7% year over year. The bottom line benefited from lower tax rates (as a result of the Tax Cuts and Jobs Act) and higher revenue contribution. These were, however, partially offset by the impact of higher wage and overtime costs resulting from a tightening labor market.

Total revenues of $1.64 billion beat the consensus mark by $1.2 million and increased 10.1% year over year. The top line was driven by contributions from acquisition of GCA Services Group and organic growth.  

Revenues related to GCA acquisition came in at $90.4 million, which was reflected in the Education ($51.6 million), the Technology & Manufacturing ($20.1 million), and the Business & Industry segments ($14.4 million).

Organic growth was 4.2%, mainly driven by Business & Industry, Technical Solutions and Technology & Manufacturing segments, which was partially offset by negative organic performance in the Aviation and Healthcare segments

Revenues by Segment

Business & Industry revenues (45% of total revenues) increased 7.8% year over year to $737.1 million. Technology & Manufacturing revenues (14%) climbed 15.4% year over year to $234.2 million. Education revenues (13%) of $214 million increased 30.8% from the prior-year quarter. Technical Solutions revenues (8%) increased 14.8% year over year to $131.4 million. Healthcare revenues (4%) increased 1% year over year to $66.6 million. Aviation revenues (16%) declined 0.7% year over year to $265.5 million.

Operating Results

Adjusted EBITDA of $89.9 million increased 27% year over year due to the GCA acquisition. Adjusted EBITDA margin improved 73 basis points (bps) to 5.5%. Adjusted income from continuing operations was $38.8 million, up 65.1% year over year. Adjusted operating income margin was 2.3%, up 80 bps from the prior-year quarter. Operating expenses increased 9.6% from the year-ago quarter to $1.46 billion. Selling, general and administrative expenses decreased 19% from the year-ago quarter to $111.2 million.

 Balance Sheet & Cash Flow 

ABM Industries exited fiscal fourth-quarter fiscal 2018 with cash and cash equivalents of $39.1 million compared with $46 million at the end of the prior quarter. Long-term debt was $902 million compared with $998.4 million at the end of the prior quarter. Net cash provided by operating activities was $93.3 million in the reported quarter.

Dividend Payment

ABM Industries paid a quarterly cash dividend of 17.5 cents per share, leading to $11.5 million of total dividend payment in the reported quarter. Additionally, the company’s board of directors approved a 2.9% dividend hike, raising the quarterly cash dividend to 18 cents per share. The dividend will be paid on Feb 4, 2019 to shareholders of record as of Jan 3, 2019. This marks the 211thconsecutive quarterly cash dividend declared by the company.

Fiscal 2019 Guidance

ABM Industries unveiled its fiscal 2019 guidance for adjusted income from continuing operations in the range of $1.90-$2.05 per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, ABM Industries has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, ABM Industries has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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