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ABM Industries (ABM) Beats on Q3 Earnings & Revenues, Ups View

ABM Industries Inc.ABM reported solid third-quarter fiscal 2021 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings from continuing operations came in at 90 cents per share, beating the consensus mark by 12.5% and increasing 20% year over year. The bottom line benefited from higher revenues, favorable mix, labor efficiencies and lower interest expenses. Increase in higher margin virus protection services as well as efficient management of direct labor and lower bad debt expense acted as additional positives. These were, however, partially offset by rise in corporate expenses (due to planned investments in information technology and higher personnel costs).

Total revenues of $1.54 billion beat the consensus estimate by 0.7% and rose 10.7% from the year-ago quarter’s levels. The upside was backed by strength across each of the business segments, which reported solid year-over-year growth.

Quarterly results were backed by continued broad-based demand for the company’s services and efficient execution within an improving business environment. The company also witnessed solid demand for the virus protection services.

Recently, the company announced that it has inked a deal to acquire a facilities services company, Able Services, for $830 million in cash. Subject to approval under the Hart-Scott-Rodino Antitrust Act and other closing conditions, the deal is anticipated to complete by September end. The acquisition is expected to boost the company’s adjusted earnings per share, strengthen its engineering and technical services and expand its janitorial services. The company is also hopeful of witnessing almost $30-$40 million in cost synergies, post closure of the deal.

So far this year, shares of ABM Industries have gained 24.8% compared with the 0.2% growth of the industry it belongs to.

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Zacks Investment Research

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Let’s check the numbers.

Segment-wise Revenues

Business & Industry revenues increased 6.7% year over year to $807.7 million. Technology & Manufacturing revenues inched up 1.2% year over year to $246.1 million. Education revenues of $208.4 million increased 10.5% from the prior-year quarter’s tallies. Aviation revenues increased 51% year over year to $175.7 million. Technical Solutions revenues increased 22.7% year over year to $146.1 million.

Operating Results

Adjusted EBITDA came in at $113.5 million, up 3.5% from the prior-year quarter’s levels. Adjusted EBITDA margin fell to 7.4% from 7.9% in the year-ago quarter.

Operating expenses increased 9.6% from the year-ago quarter’s figure to $1.29 billion. Selling, general and administrative expenses increased more than 100% from the year-ago quarter’s levels to $253.8 million.

ABM Industries Incorporated Price, Consensus and EPS Surprise

ABM Industries Incorporated price-consensus-eps-surprise-chart | ABM Industries Incorporated Quote

Balance Sheet & Cash Flow

ABM Industries exited third-quarter fiscal 2021 with cash and cash equivalents of $505.4 million compared with $435.7 million at the end of the prior quarter. Long-term debt was $623.8 million compared with $524.2 million at the end of the prior quarter.

Net cash generated from operating activities totaled $87.6 million in the reported quarter. Free cash flow came in at $79.2 million.

Dividend Payout

ABM Industries paid out a quarterly cash dividend of 19 cents per share, leading to a $12.8-million total dividend payout in the reported quarter. The company’s board of directors announced a quarterly cash dividend of 19 cents, payable on Nov 1, 2021, to its shareholders of record as of Oct 7, 2021. This marked the 222nd consecutive quarterly cash dividend declared by the company.

Fiscal 2021 Guidance

For fiscal 2021, ABM Industries raised its guidance for adjusted income from continuing operations to the range of $3.45-$3.55 per share from the prior guidance of $3.30-$3.50. The Zacks Consensus Estimate of $3.42 falls within the updated guidance.

Currently, ABM Industries sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Business Services Companies

Equifax’s EFX second-quarter 2021 adjusted earnings of $1.98 per share beat the Zacks Consensus Estimate by 15.8% and increased on a year-over-year basis. Revenues of $1.23 billion outpaced the consensus estimate by 6.4% and rose 26% year over year on a reported basis and 23% on a local-currency basis.

Robert Half’s RHI second-quarter 2021 earnings of $1.33 per share beat the consensus mark by 26.7% and surged more than 100% year over year. Revenues of $1.6 billion surpassed the consensus mark by 6.5% and increased 42.3% year over year on a reported basis and 40% on an adjusted basis.

ManpowerGroup’s MAN second-quarter 2021 adjusted earnings of $2.02 per share beat the consensus mark by 68.2% and increased more than 100% year over year. Revenues of $5.28 billion beat the consensus mark by 2% and rallied 41% year over year on a reported basis and 31.3% on a constant-currency basis.

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