Here's Why You Should Hold ABM Industries in Your Portfolio

ABM Industries Incorporated ABM has an impressive Growth Score of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of quality and sustainability of its growth.

The company’s earnings are anticipated to register 10.6% growth in the current quarter and 20.5% growth in fiscal 2020.

Aiding Factors

ABM is currently executing 2020 Vision, a comprehensive transformation initiative, aimed at achieving operational improvement and vertical realignment. As part of this plan, the company is upgrading its human-resources information, labor management and enterprise-resource planning systems. It is utilizing technology to enhance account planning, labor management, payroll and procurement. ABM is centralizing many of its back-office functions via Enterprise Services Center in Sugar Land.

The buyout of GCA Services Group strengthened ABM’s long-term financial and operational capacities, primarily in the Technology & Manufacturing, Business & Industry and Education segments. GCA is now fully embedded in ABM’s organic base.

ABM Industries Incorporated Price and Consensus

ABM Industries Incorporated Price and Consensus

ABM Industries Incorporated price-consensus-chart | ABM Industries Incorporated Quote

The company has been able to leverage its scale, increase purchasing power and identify preferred suppliers through consolidating purchasing activities, thereby saving cost in supplies and materials procurement. Post complete execution, the 2020 Vision will boost long-term profits on the back of an industry-based go-to-market approach.

Risks Associated

ABM Industries has a debt-laden balance sheet. Total debt at the end of the fiscal third-quarter fiscal 2020 was $751 million, while the company’s cash and cash equivalent is of $229 million, well below its debt level, underscoring that the company doesn’t have enough cash to meet this debt burden. However, the cash level can meet the current debt of $87 million.

Zacks Rank and Key Picks

ABM Industries currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are Republic Services RSG, Elastic N.V. ESTC and NV5 Global NVEE, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected earnings per share (three to five years) growth rate for Republic Services, Elastic and NV5 Global 7.9%, 26% and 13.7%, respectively.

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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 Nasdaq, Inc.

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