It has been about a month since the last earnings report for ABM Industries (ABM). Shares have lost about 10.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is ABM Industries due for a breakout? 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 Surpasses Q2 Earnings & Revenues Estimates
ABM Industries reported strong second-quarter fiscal 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings from continuing operations came in at 60 cents per share, which outpaced the consensus mark by more than 100% and the year-ago quarter’s reported figure by 27.7%. The bottom line benefited from higher margin improvement in Work Orders. Additionally, the company managed its direct labor and related personnel costs well to align with the operating environment and reduced certain corporate expenses such as information technology costs and share-based compensation.
Total revenues of $1.49 billion beat the consensus estimate by 3.7% but declined 6.2% from the year-ago quarter. The year-over-year decline was due to coronavirus-related disruptions, facility closures, and service scope changes, mainly within the Aviation, Technical Solutions and Education segments. These were, however, partially offset by huge demand for COVID-19 related Work Orders (tags) in the Business & Industry, Technology & Manufacturing and Education segments.
Revenues by Segment
Business & Industry revenues (53% of total revenues) decreased 2.7% year over year to $785.6 million. Aviation revenues (12%) decreased 26.1% year over year to $184.7 million. Education revenues (13%) of $200.1 million decreased 4.4% from the prior-year quarter. Technical Solutions revenues (8%) decreased 10% year over year to $122.3 million.
Technology & Manufacturing revenues (16%) improved 4.2% year over year to $233.7 million.
Adjusted EBITDA came in at $91 million compared with $84.7 million in the prior-year quarter. Also, adjusted EBITDA margin came in at 6.1% compared with 5.3% in the year-ago quarter.
Adjusted income from continuing operations was $40.4 million, up 28.3% year over year. Operating expenses decreased 7.6% from the year-ago quarter to $1.31 billion. Selling, general and administrative expenses increased 10.1% from the year-ago quarter to $119.4 million.
Balance Sheet & Cash Flow
ABM Industries exited second-quarter fiscal 2020 with cash and cash equivalents of $555.9 million compared with $69.8 million at the end of the prior quarter. Long-term debt was $1.11 billion compared with $786.3 million at the end of the prior quarter.
Net cash used in operating activities totaled $162.2 million in the reported quarter. Free cash flow came in at $154.6 million.
Dividend Payout & Share Repurchases
ABM Industries paid out a quarterly cash dividend of 18.5 cents per share, leading to $12.3 million of total dividend payout in the reported quarter. Additionally, the company’s board of directors announced a cash dividend of 18.5 cents per share, to be paid out on Aug 3, 2020, to its shareholders of record as of Jul 2. This marked the 217th consecutive quarterly cash dividend declared by the company.
During the reported quarter, ABM Industries repurchased nearly 0.2 million shares for $5.1 million. In March 2020, the company had suspended all further share repurchases. As of Apr 30, 2020, the company had $144.9 million authorized shares available for repurchase under its $150 million share repurchase program.
Fiscal 2020 Guidance
On Mar 26, 2020, ABM Industries had withdrawn its previously announced fiscal 2020 guidance due to the uncertainty prevailing in the market as a result of the coronavirus outbreak.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 20.72% due to these changes.
Currently, ABM Industries has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise ABM Industries has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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