Will ABM Industries (ABM) Q3 Earnings Disappoint Yet Again? - Analyst Blog

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Business services provider ABM Industries Incorporated ( ABM ) is scheduled to report its third-quarter fiscal 2014 results after the closing bell on Sep 3. In the last reported quarter, ABM's non-GAAP earnings fairly missed the Zacks Consensus Estimate. Let's see how things are shaping up for this announcement.

Growth Factors in the Third Quarter

ABM has developed a platform to deliver an end-to-end service model to its clients by realigning its operational structure to an on-site, mobile and on-demand market based structure. This realignment has improved its long-term growth prospects and provides higher margin opportunities by enabling it to better deliver end-to-end services to its clients across urban, suburban and rural areas. The company further expects to extend its global footprint and strengthen its position in existing markets through both inorganic and organic growth across the industry verticals.

Recently, ABM acquired Airco Commercial Services Inc. for an undisclosed amount to augment its Northern California presence. Airco Commercial is a leading provider of heating, ventilation and air conditioning (HVAC) service, energy solutions and building controls in commercial and industrial buildings in Northern California. With the acquisition, ABM is expected to provide energy-efficient solutions to electrical, engineering, janitorial, landscape, security and parking clients throughout the region. This deal will likely strengthen its position in the market and unlock additional values by generating incremental revenue stream and minimizing operating expenses for clients.

ABM has a healthy pipeline of businesses with strength particularly seen in its government business. The company expects to improve its profitability with the seamless integration of acquired businesses and newer contracts. The corporate restructuring initiatives are also well on track to yield sustained long-term growth momentum.

Earnings Whispers

Despite focused attempts to restructure its business, our proven model conclusively shows that ABM is likely to miss earnings this quarter as it lacks the key ingredients for a success recipe.

Negative Zacks ESP: Expected Surprise Prediction or Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at -2.22%. This indicates likely earnings miss for the shares.

Zacks Rank #4 (Sell): ABM's Zacks Rank #4 further tilts the predictive power of ESP in the negative direction. Note that stocks with Zacks Ranks of #1, #2 and #3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and #5) should never be considered going into an earnings announcement.   

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Limoneira Company ( LMNR ), earnings ESP of +12.50% and Zacks Rank #2 (Buy).

Shoe Carnival Inc. ( SCVL ), earnings ESP of +5.88% and Zacks Rank #2 (Buy).

Zumiez, Inc. ( ZUMZ ), earnings ESP of +4.55% and Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: ZUMZ , ABM , SCVL , LMNR

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