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ABM Sets Foot in Germany

Zacks Equity Research


ABM Industries ( ABM) has expanded its partnership with sports and entertainment company, AEG, with the commencement of its commercial cleaning services for AEG owned and operated O2 World Hamburg arena in Germany. 


The parties have signed a multi-year German contract which came into effect on September 1, 2012. ABM has fortified its partnership with AEG by encompassing international locations across the globe under the deal.


The multipurpose, state-of-the-art O2 World Hamburg arena hosts nearly 140 events annually with more than one million viewers each year. The arena is famous as the home for the Hamburg Freezers ice hockey team and the HSV Hamburg club handball team.


ABM has provided its services to several AEG venues in the U.S. These include STAPLES Center, Nokia Theatre L.A. LIVE and The GRAMMY Museum (all located in L.A. LIVE) in downtown Los Angeles; Valley View Casino Center in San Diego, among others.


The strategic partnership with AEG has opened up doors for ABM to reach out to countries in Europe and other international locations. Therefore, ABM will be able to attain a wider client base across the globe, helping it to be the global leader in integrated facility solutions.


In the recently reported third-quarter fiscal 2012, ABM posted adjusted earnings of 37 cents per share, falling short of the Zacks Consensus Estimate of 42 cents as well as the year-ago quarter's earnings of 51 cents per share. 


Total revenues remained flat year over year at $1.08 billion, missing the Zacks Consensus Estimate of $1.09 billion. Contract cancellations of government-related businesses in the Facility Solutions segment negatively impacted the results. 


Although ABM is expanding in the global arena, the dearth of government contracts as well as weak global economic condition are expected to weigh on the margins moving forward. Moreover, as the company’s Facility Solution segment depends heavily on government contracts, any further cancellation of these contracts would have a negative impact on its revenues.


ABM retains a short-term Zacks #3 Rank (Hold). We have a long-term Neutral recommendation on the stock.

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