) recently delivered its 3rd consecutive positive earnings surprise
on strong revenue growth and expanding profit margins.
Management raised its full year guidance following its most recent
beat, prompting analysts to revise their estimates higher for both
2013 and 2014. This sent the stock to a Zacks Rank #1 (Strong Buy).
Along with strong earnings momentum, ABM offers investors a solid
dividend yield and reasonable valuation.
ABM Industries provides all types of facility solutions services to
thousands of commercial, governmental, industrial, institutional,
retail, and residential facilities located primarily throughout the
United States. Around half of its revenue comes from janitorial
services (52%), but it also generates revenue from parking services
(13%), building & energy services (8%), security (8%) and
general facility services (13%).
Second Quarter Results
ABM delivered better than expected second quarter results on June
3. Adjusted earnings per share soared 20% to 36 cents per share,
beating the Zacks Consensus Estimate by 3 cents.
Revenues rose 11% to $1.174 billion, which was in-line with
consensus. This was driven in large part by recent acquisitions,
but organic growth was solid too. The 'Janitorial' segment saw
organic top-line growth of 2%, for instance, while 'Facility
Services' saw 8% growth.
Meanwhile, adjusted operating income jumped 24% as the company
leveraged its fixed expenses.
Following the solid second quarter beat, management raised its
guidance for the remainder of 2013. The company now expects
adjusted EPS of $1.40-$1.50, up from previous guidance of
President and CEO Henrik Slipsager noted in the Q2 release that the
"to lay the foundation for more revenue and profit growth in
the future and look forward to sequential improvement in the back
half of the year, particularly in the fourth quarter."
He also noted that the recent acquisitions
"are exceeding expectations"
This prompted analysts to revise their estimates higher for both
2013 and 2014, sending the stock to a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for 2013 is now $1.45, up from $1.38
before the Q2 report, and at the top-end of guidance. The 2014
consensus is currently $1.55, up from $1.46 over the same period.
Solid Yield, Reasonable Valuation
In the second quarter release, ABM declared its 189th consecutive
quarterly dividend. It currently yields a solid 2.5%
Shares currently trade at 16x 12-month forward earnings, which is a
slight discount to its 10-year median of 17x and a significant
discount to the industry median of 24x.
The Bottom Line
With strong earnings momentum, a solid dividend yield and
reasonable valuation, ABM offers investors attractive total return
Todd Bunton is the Growth & Income Stock Strategist for
and Editor of the
Income Plus Investor service
ABM INDUSTRIES (ABM): Free Stock Analysis
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