ABM Industries Incorporated
) recently completed the acquisition of HHA Services, a leading
facility management and food provider to different communities.
The financial details of the transaction were not disclosed.
Based in St. Clair Shores, Michigan, HHA Services provides food
and facility management services to hospitals, health care
systems, long-term care facilities and retirement communities.
Its line of services encompasses environmental services, plant
operations and maintenance as well as food and nutrition.
The acquisition will expand New York-based ABM Industries'
presence in the Michigan area. It will also fortify ABM
Industries' health care capabilities enabling it to reach to a
wider customer base.
ABM Industries' strategy entails growth through acquisitions.
Earlier in October, the company announced that it has agreed to
acquire Air Serv Corporation to expand its potential in the
end-to-end needs of the airlines and airport authorities. ABM
Industries will use its cash in hand (of nearly $158 million) to
fund the acquisition.
ABM Industries' third-quarter 2012 adjusted earnings of 37 cents
per share fell short of the Zacks Consensus Estimate of 42 cents.
Total revenues remained flat year over year at $1.08 billion and
missed the Zacks Consensus Estimate of $1.09 billion.
As the company heavily depends on acquisitions for growth, its
failure to make new acquisitions on a regular basis will
inevitably impede its growth. A slowdown in acquisition activity
may not only lead to lower revenues, but also lower margins, as
revenues associated with acquired operations generally have
higher margins than new revenues through internal growth.
Moreover, dearth of government spending along with weak global
economic conditions is expected to weigh on the margins moving
forward. ABM Industries depends heavily on government contracts
and, as such, any cancellation of these contracts will affect its
ABM Industries, which belongs to the business services industry,
retains a Zacks #5 Rank (Strong Sell).
) is a Zacks #2 Rank (Buy) stock in the same industry. We have a
long-term Neutral recommendation for ABM Industries.
ABM INDUSTRIES (ABM): Free Stock Analysis
ROLLINS INC (ROL): Free Stock Analysis Report
To read this article on Zacks.com click here.