Business services provider
ABM Industries Incorporated
) reported second-quarter fiscal 2014 adjusted earnings of 33 cents
per share, well below the Zacks Consensus Estimate of 40 cents. The
recurring earnings compared unfavorably with the year-ago adjusted
tally of 36 cents, which benefited from a lower share count.
GAAP earnings for the reported quarter were $15.2 million or 27
cents per share compared with $19.3 million or 35 cents per share
in the year-earlier quarter. The year-over-year decrease in
earnings was primarily attributable to higher legal expenses,
additional start-up costs due to newer contracts and inclement
Total quarterly revenue increased 4.9% year over year to an
all-time high of $1,231.3 million with healthy organic growth of
4.1% from new business and expansion of services. Revenues for the
reported quarter beat the Zacks Consensus Estimate of $1,227
Quarterly revenues from the segment increased 3.1% year over year
to $631.7 million due to significant new business wins and robust
discretionary tag sales. However, segment operating profit declined
3.5% to $29.1 million owing to higher initial costs associated with
a new contract and steep rise in legal expenses.
Revenues improved 1.4% year over year to $149.5 million, while
operating profit declined 12.9% to $5.4 million.
Revenues from this segment were marginally up by 0.7% year over
year to $152.6 million, while operating profit expanded 4.9% to
$6.4 million due to the termination of lower margin contracts and
stringent cost management.
The segment reported revenues of $93.8 million compared with $91.5
million in the year-ago quarter, representing a 2.5% year-over-year
increase. Operating profit increased 4.8% to $2.2 million,
benefiting from new business and sales associated with bundled
Building & Energy Solutions:
Revenues from the segment were up 26.2% to $118.5 million, driven
by healthy government business, bundled energy solutions and the
accretive acquisition of BEST Infrared Services and Alpha
Mechanical. Operating profit more than doubled to $3.5 million with
stringent cost-cutting measures, top-line growth and benefits from
investments in healthcare vertical and energy businesses.
Revenues improved 12.0% year over year to $85.2 million due to
strong organic growth and the Aug 2013 acquisition of Blackjack,
while operating profit declined 4.0% to $2.4 million owing to high
Adjusted EBITDA decreased 5.0% in the reported quarter to $49.4
million, driven by increased legal expenses of $1.6 million, higher
start-up costs of $1.5 million related to new contracts, and $0.8
million charges due to adverse weather conditions.
ABM has a healthy pipeline of future businesses with strength
particularly seen in its government business. The company expects
to improve its profitability in the coming quarters with seamless
integration of acquired businesses and newer contracts. Management
also reiterated that corporate restructuring initiatives were well
on track to yield sustained long-term growth momentum.
Cash and cash equivalents at quarter end were $37.7 million. Net
cash from operations improved 55.4% to $76.6 million, which enabled
the company to reduce its debt and pay quarterly dividend.
Outstanding debt under its credit facility was down to $327.2
million from $367.0 million in the previous quarter.
ABM maintained its quarterly cash dividend at 15.5 cents per share,
which represented its 193rd consecutive quarterly dividend.
ABM reiterated its guidance for fiscal 2014. The company expects
income from continuing operations in the range of $1.38 to $1.48
per share. Adjusted income is expected in the range of $1.58 to
$1.68 per share.
ABM's strategy entails growth through acquisitions. The company
expects to extend its global footprint as well as strengthen its
position in existing markets through successful integration and
organic growth across industry verticals.
ABM presently has a Zacks Rank #3 (Hold). Other players in the
industry that warrant a look include
Huron Consulting Group Inc.
Global Payments Inc.
), all of which carry a Zacks Rank #2 (Buy).
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