Investors in ABM Industries Incorporated (NYSE:ABM) had a good week, as its shares rose 4.3% to close at US$38.70 following the release of its annual results. ABM Industries reported US$6.5b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.90 beat expectations, being 8.7% higher than what analysts expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see analysts' latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, ABM Industries's four analysts currently expect revenues in 2020 to be US$6.52b, approximately in line with the last 12 months. Statutory earnings per share are expected to reduce 2.6% to US$1.86 in the same period. In the lead-up to this report, analysts had been modelling revenues of US$6.63b and earnings per share (EPS) of US$1.99 in 2020. Analysts seem to have become a little more negative on the business after the latest results, given the small dip in their earnings per share forecasts for next year.
The consensus price target held steady at US$42.50, with analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on ABM Industries, with the most bullish analyst valuing it at US$48.00 and the most bearish at US$34.00 per share. This shows there is still quite a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Further, we can compare these estimates to past performance, and see how ABM Industries forecasts compare to the wider market's forecast performance. We would highlight that ABM Industries's revenue growth is expected to slow, with forecast 0.4% increase next year well below the historical 8.2%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 5.7% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than ABM Industries.
The Bottom Line
The most important thing to take away is that analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that ABM Industries's revenues are expected to perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on ABM Industries. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for ABM Industries going out to 2021, and you can see them free on our platform here..
You can also see whether ABM Industries is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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