It has been about a month since the last earnings report for ABM Industries (ABM - Free Report) . Shares have added about 3.7% 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 its most recent earnings report in order to get a better handle on the important drivers.
ABM Industries Q4 Earnings Top, Revenues Lag Estimates
ABM Industries reported mixed fourth-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.
Adjusted earnings (from continuing operations) came in at 66 cents per share, which outpaced the consensus mark by 6.5% and the year-ago quarter’s reported figure by 13.8%. The bottom line benefited from higher revenue contribution from the Technical Solutions segment, higher margin revenue mix and improved labor management primarily within the Business & Industry segment, and favorable impact of the adoption of Accounting Standards Codification ("ASC") 606.
Total revenues of $1.65 billion missed the consensus estimate by 0.7% and decreased 0.1% year over year. Organic revenue growth of 0.6% (excluding the adoption of ASC 606 and ASC 853) was driven by growth within the Technical Solutions segment, partially offset by a decline in revenues at Business & Industry and Aviation segments, inclusive of the loss of lower-margin contracts.
Revenues by Segment
Business & Industry revenues decreased 1.9% year over year to $806.9 million. Aviation revenues decreased 6.5% year over year to $251.5 million. Technology & Manufacturing revenues declined 2% year over year to $229.7 million. Education revenues of $213.8 million decreased 2.4% from the prior-year quarter.
Technical Solutions revenues increased 25.5% year over year to $175.5 million.
Adjusted EBITDA of $93 million increased 3.4% year over year in the quarter under review. Also, adjusted EBITDA margin of 5.5% improved 10 basis points year over year. Adjusted income from continuing operations was $44.7 million, up 15.2% year over year.
Operating expenses decreased 0.8% from the year-ago quarter to $1.45 billion. Selling, general and administrative expenses increased 0.8% from the year-ago quarter to $112.1 million.
Balance Sheet & Cash Flow
ABM Industries exited fourth-quarter fiscal 2019 with cash and cash equivalents of $58.5 million compared with $60.5 million at the end of the prior quarter. Long-term debt was $744.2 million compared with $872.2 million at the end of the prior quarter. Net cash provided by operating activities totaled $148.8 million in the reported quarter.
ABM Industries paid out a quarterly cash dividend of 18 cents per share, leading to $12 million of total dividend payout in the reported quarter. Additionally, the company’s board of directors approved a 2.8% dividend hike, raising the quarterly cash dividend to 18.5 cents per common share, payable on Feb 3, 2020 to stockholders of record on Jan 2, 2020. This marks the 215th consecutive quarterly cash dividend declared by the company.
Share Repurchase Program
The company's board of directors authorized a $150 million share repurchase program replacing its existing share repurchase program, which was authorized in 2015.
Fiscal 2020 Guidance
ABM Industries unveiled its fiscal 2020 guidance. The company expects adjusted income of $1.90-$2.10 per share from continuing operations.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -11.5% due to these changes.
At this time, ABM Industries has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise ABM Industries has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.