Markets
ABM

ABM Industries (ABM) Stock Down 32% in a Year: Here's Why

Shares of ABM Industries Inc.ABM have lost 33% against the industry 's growth of 17.4% in a year.

Moreover, the facility management provider's shares tumbled to a 52-week low of $28.54 during the trading session on May 29. The figure recovered marginally to close at $28.82, down 1.3%.

Reasons Behind the Plunge

ABM Industries operates in a highly competitive industry where the barriers to entry are very low. This makes it difficult for the company to maintain strong and long-term relationships with clients. In order to win new clients and retain the existing ones, the company has to remain technologically updated to meet varying and rapidly changing client demands.

This increases operating expenses of the company, thereby reducing margins. In 2017, operating expenses rose 14% to $1.34 billion. As of Jan 31, 2018, the figure was up 19.6% to 1.43 billion. Rising operating costs are a major headwind for the company's growth.

The company's business outside the United States, especially in the United Kingdom, remains susceptible to the outcome of Brexit. With the exit of U.K. from the European Union (EU), the European economy has become highly unpredictable with disruptions and restrictions in acquisitions and trade with other European Union members. Such activities weigh on company's revenues and margins.

ABM Industries has a highly leveraged balance sheet. Notably, its long-term debt rose from $268.3 million in 2016 to $1.16 billion at the end of 2017. The company had $62.8 million of cash and cash equivalents in 2017. As of Jan 31, 2018, cash and cash equivalents were $68.6 million while long-term debt was $1.17 billion. This implies that ABM Industries is currently unable to generate adequate amount of operating cash flow to service its debt.

Stocks to Consider

Some better-ranked stocks in the broader Business Services sector include Accenture plc ACN , NV5 Global NVEE and Bureau Veritas S. A. BVRDF . All the stocks carry a Zacks Rank #2 (Buy).

The long-term expected earnings per share growth rates for Accenture, NV5 Global and Bureau Veritas are 10%, 20% and 8%, respectively.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ABM Industries Incorporated (ABM): Free Stock Analysis Report

Accenture PLC (ACN): Free Stock Analysis Report

Bureau Veritas Registre International De Classification (BVRDF): Free Stock Analysis Report

NV5 Global, Inc. (NVEE): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

ABM ACN NVEE

Other Topics

Investing Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More