ABM Industries (ABM) Misses Q4 Earnings, Offers Guidance

Business services provider ABM Industries Incorporated (NYSE:ABM) recorded fourth-quarter fiscal 2017 (ended Oct 31, 2017) loss of $2.5 million or loss of 4 cents per share from continuing operations against net income of $9 million or 16 cents per share in the year-earlier quarter. Despite higher revenues, the significant turnaround in the bottom line was primarily attributable to high operating expenses.

Adjusted earnings (from continuing operations) for the reported quarter were $23.5 million or 37 cents per share compared with $29.2 million or 51 cents per share in the year-ago quarter. The year-over-year decrease in adjusted earnings was largely due to one-time acquisition costs of GCA Services and litigation costs related to the Aviation segment. Adjusted earnings for the quarter missed the Zacks Consensus Estimate by 9 cents.

For fiscal 2017, GAAP income from continuing operations improved to $78.1 million or $1.34 per share from $62.3 million or $1.09 per share in fiscal 2016. Adjusted income from continuing operations was $101.9 million or $1.75 per share compared with $99.2 million or $1.74 per share in fiscal 2016.

ABM Industries Incorporated Price, Consensus and EPS Surprise

ABM Industries Incorporated Price, Consensus and EPS Surprise | ABM Industries Incorporated Quote

Top-Line Improvement

Revenues for the reported quarter increased 13.3% year over year to $1,497.9 million, largely driven by organic and inorganic growth. Organic growth improved 2.3% year over year while acquisitions contributed $178.5 million of incremental revenues during the quarter related to the GCA Services buyout. Organic growth in the Aviation segment was driven by higher passenger services, cabin cleaning, parking, catering and transportation services for new and existing customers. Organic growth in the Business & Industry segment was led by higher janitorial and facility services revenues in the U.S. and U.K. operations. Quarterly revenues exceeded the Zacks Consensus Estimate of $1,494 million.

For fiscal 2017, ABM reported revenues of approximately $5.5 billion, up 6% year over year, driven by $208.1 million of incremental revenues from acquisitions and organic revenue growth of 2.6%.

Operating profit declined to $4.4 million from $10.8 million in the year-ago period, owing to higher operating expenses. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) for the reported quarter increased to $70.8 million from $61.5 million in the year-earlier quarter for respective margins of 4.7% and 4.6% owing to the newly-acquired GCA business, revenue contribution and higher procurement savings.

Financial Position

Cash and cash equivalents at fiscal 2017 end were $62.8 million compared with $53.5 million in the prior-year period, while total debt for the respective periods was $1,161.3 million and $268.3 million. Net cash from operating activities in fiscal 2017 was $5.6 million compared with $83.5 million in the year-ago period.

ABM increased its quarterly dividend by 3% year over year to 17.5 cents per share. This represented the 207th consecutive quarterly cash dividend for the company.

Guidance

In concurrence with the quarterly results, ABM offered guidance for fiscal 2018. GAAP income from continuing operations is expected to be within $1.33 to $1.43 per share, while adjusted income from continuing operations is anticipated to be in the range of $1.70 to $1.80 per share.

Management observed that fiscal 2017 was a significant year for ABM as it operated for the first time under its new vertical, industry group organizational structure. The company also launched the 'ABM Way' during fiscal 2017, which signifies the foundation steps of Phase II of its 2020 Vision strategy.

Going Forward

ABM’s comprehensive, strategic and transformation initiative is focused on driving sustainable profitability by effectively allocating resources to higher margin services and business verticals with a strong competitive edge. We expect this to fuel the company’s growth momentum in the coming quarters.

ABM currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Accenture plc (NYSE:ACN) , NV5 Global, Inc. (NASDAQ:NVEE) and CRA International, Inc. (NASDAQ:CRAI) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Accenture has a long-term earnings growth expectation of 10.3%. It has beaten earnings estimates in each of the trailing four quarters with a positive surprise of 2.6%.

NV5 Global has a long-term earnings growth expectation of 20%. It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 4.5%.

CRA International topped estimates twice in the trailing four quarters with an average positive earnings surprise of 0.5%.

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