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ABM Industries (ABM) Q4 Earnings Top, Revenues Lag Estimates

Zacks Equity Research

ABM Industries Inc. ABM 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.

So far this year, shares of ABM Industries have gained 17.1% compared with the industry’s 2.7% loss.


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.  

Operating Results

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.

ABM Industries Inc. Price, Consensus and EPS Surprise

ABM Industries Incorporated Price, Consensus and EPS Surprise
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 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.

Dividend Payout

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. The Zacks Consensus Estimate of $2.09 lies within the guided range.

Zacks Rank & Stocks to Consider

Currently, ABM Industries carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are Cardtronics CATM, Global Payments GPN and FactSet Research Systems Inc. FDS. While Cardtronics sports a Zacks Rank #1 (Strong Buy), Global Payments and FactSet Research Systems 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 Cardtronics, Global Payments and FactSet Research Systems is 4%, 18% and 9%, respectively.

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