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ABM Industries (ABM) Up 9.7% Since Last Earnings Report: Can It Continue?

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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 9.7% 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 drivers.

ABM Industries Earnings Beat Estimates in Q1

ABM Industries first-quarter fiscal 2019 adjusted earnings (from continuing operations) of 31 cents per share beat the Zacks Consensus Estimate by 4 cents and increased 19.2% year over year. The bottom line benefited from higher margin revenue contribution and the impact of the adoption of Accounting Standards Codification ("ASC") 606.

Total revenues of $1.61 billion increased 1.2% year over year on the back of 2% organic revenue growth (excluding the adoption of ASC 606 and ASC 853).

Revenues by Segment

Business & Industry revenues (48% of total revenues) increased 2.4% year over year to $774.5 million. Technology & Manufacturing revenues (15%) climbed 1.7% year over year to $236.1 million. Technical Solutions revenues (7%) increased 3.7% year over year to $107.9 million.  Aviation revenues (16%) declined 2.9% year over year to $252.4 million. Healthcare revenues (4%) decreased 1.6% year over year to $66.7 million. Education revenues (13%) of $204.7 million decreased 1.1% from the prior-year quarter.

Operating Results

Adjusted EBITDA of $68.8 million increased 5.7% year over year. Adjusted EBITDA margin improved 18 basis points (bps) to 4.3%. Adjusted income from continuing operations was $20.8 million, up 19.7% year over year. Adjusted operating income margin was 1.3%, up 20 bps from the prior-year quarter. Operating expenses increased 1.2% from the year-ago quarter to $1.45 billion. Selling, general and administrative expenses increased 3.4% from the year-ago quarter to $112.7 million.

Balance Sheet & Cash Flow

ABM Industries exited fiscal first-quarter fiscal 2019 with cash and cash equivalents of $30.6 million compared with $39.1 million at the end of the prior quarter. Long-term debt was $945.8 million compared with $902 million at the end of the prior quarter. Net cash used in operating activities was $39.3 million in the reported quarter.

Dividend Payment

ABM Industries paid a quarterly cash dividend of 18 cents per share, leading to $11.9 million of total dividend payment in the reported quarter. Additionally, the company’s board of directors announced a cash dividend of 18 cents per share, payable on Mar 6, 2019 to shareholders of record as of Apr 4. This marks the 212th consecutive quarterly cash dividend declared by the company.

Fiscal 2019 Guidance

ABM Industries reaffirmed 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?

Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -6.67% due to these changes.

VGM Scores

At this time, ABM Industries has a subpar Growth Score of D, though it is lagging a bit 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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