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ABM Industries (ABM) Stock Declines 11.2% YTD: Here's Why

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Shares of ABM Industries Incorporated ABM have lost 11.2% against the industry’s gain of 3% on a year-to-date basis.


Reasons Behind the Price Plunge

The company’s significant presence in the United Kingdom seems to be a major headwind for its operations. Post the Brexit referendum, the European economy has become highly unpredictable with disruptions and restrictions in acquisitions and trade with other European Union members. Such activities affect the company’s revenues and margins.

Moreover, ABM Industries' dependence on inorganic growth is a concern. It appears that the company’s failure to make new acquisitions on a regular basis is hampering its growth rate with reduced revenues and margins. Strong competitive pressure also limits its success rate in bidding for profitable businesses and its ability to increase prices in accordance with rising costs.

The company is also engaged in several energy efficiency projects. However, such projects remain exposed to federal and state legislature policies and natural disasters.

Notably, the company's earnings missed estimates in first-quarter fiscal 2018. Adjusted earnings (from continuing operations) of 26 cents per share lagged the Zacks Consensus Estimate by 2 cents and declined 31.6% from the year-ago quarter. The year-over-year decrease was largely due to interest expenses, amortization and higher share count. The company’s operating profit of $19.5 million was down 18.2% year over year.

Downward Estimate Revisions & Zacks Rank

The direction of estimate revisions serves as an important pointer when it comes to the price of a stock. Over the last 60 days, the Zacks Consensus Estimate for current quarter earnings decreased 13.5% to 45 cents per share. Estimates for 2018 decreased 8.1% to $1.93 per share in the same time frame.

The downward estimate revisions along with a Zacks Rank #4 (Sell) reflect pessimism over prospects of ABM Industries.

Negative Earnings Surprise History

ABM Industries has a disappointing earnings surprise history. The company’s earnings have lagged the Zacks Consensus Estimate in three of the previous four quarters, delivering an average negative earnings surprise of 4.1%.

Stocks to Consider

Some better-ranked stocks in the broader Business Services sector include Fiserv FISV, Global Payments GPN and Fidelity National Information Services FIS. All the stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The projected earnings growth rate (3-5 years) for Fiserv, Global Payments and Fidelity is 11.5%, 15.8% and 12%, respectively.

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ABM Industries Incorporated (ABM) : Free Stock Analysis Report
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