Shares of ABM Industries Incorporated (ABM - Free Report) have gained 30.3% over the past year, significantly outperforming the 4.9% rally of the industry it belongs to.
With expected earnings growth rate of 3.2% in fiscal 2019 and 15.1% in fiscal 2020, ABM seems to be a stock that investors should retain in their portfolio.
Factors That Bode Well
ABM is currently executing 2020 Vision, a comprehensive transformation initiative, aimed at achieving operational improvement and vertical realignment. As part of this plan, the company is upgrading its human resources information, labor management and enterprise resource planning systems. It is utilizing technology to enhance account planning, labor management, payroll and procurement. ABM is centralizing many of its back-office functions via Enterprise Services Center in Sugar Land.
ABM Industries Incorporated Revenue (TTM)
The company has been able to leverage its scale, increase the purchasing power and identify preferred suppliers through consolidating purchasing activities, thereby saving cost in supplies and materials procurement. Post complete execution, the 2020 Vision will boost long-term profits on the back of an industry-based go-to-market approach.
The buyout of GCA Services Group has strengthened ABM’s long-term financial and operational capacities, primarily in the Technology & Manufacturing, Business & Industry and Education segments. GCA is now fully embedded in ABM’s organic base.
Despite riding on significant growth prospects, increasing labor cost and weak cash position are concerns for the company. Nevertheless, we believe that systematic and strategic plan of actions will drive long-term profitable growth.
Zacks Rank & Stocks to Consider
Currently, ABM has a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Navigant Consulting , WEX (WEX - Free Report) and FLEETCOR Technologies (FLT - Free Report) . While Navigant Consulting sports a Zacks Rank #1 (Strong Buy), WEX and FLEETCOR carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS (three to five years) growth rate for Navigant Consulting, WEX and FLEETCOR is 13.5%, 15% and 16.5%, respectively.
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