ABM Industries (ABM) Gains From Acquisitions Amid High Costs
ABM Industries' (ABM) bottom line continues to benefit from greater customer demand for higher-margin COVID-related work orders, efficient management of direct labor and a favorable business mix.
ABM Industries Inc.’s ABM shares have had an impressive run on the bourses so far this year. The stock has appreciated 9% in the said time frame compared with the 15.4% decline of the industry it belongs to.
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The company recently reported fourth-quarter fiscal 2021 adjusted earnings from continuing operations of 85 cents per share, beating the consensus mark by 6.3% and increasing 23.2% year over year. Total revenues of $1.69 billion beat the consensus estimate by 4.7% and rose 14.2% from the year-ago level.
How is ABM Industries Doing?
ABM Industries' top-line growth is backed by strength across Aviation, Technical Solutions, and Business & Industry business segments. Greater customer demand for higher-margin COVID-related work orders, efficient management of direct labor — especially in Business & Industry and Aviation — and a favorable mix of business in Aviation and Technical Solutions have been benefiting the company’s bottom line.
ABM Industries' strategy entails growth through strategic acquisitions while maintaining desirable profit margins. The acquisition of Able Services has strengthened ABM Industries' engineering and technical services as well as expanded its sustainability, energy efficiency offerings, core businesses, and key geographies. The acquisition of GCA Services Group has expanded the company’s long-term operational and financial position. The GCA integration has been completed and is making meaningful contributions to ABM Industries' overall operational results, predominantly within Technology & Manufacturing, Business & Industry, and Education segments.
ABM Industries is seeing an increase in overall expenses due to risinginvestments in EnhancedClean, other pandemic-related projects and certain corporate initiatives, and an increase in bad debt expenses, legal costs, and settlements as well as medical and dental insurance costs. For fourth-quarter fiscal 2021, selling, general and administrative expenses of $180.9 million increased 16.6% year over year.
Zacks Rank and Stocks to Consider
ABM Industries currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Business Services sector include Avis Budget CAR, Cross Country Healthcare (CCRN) and Charles River Associates (CRAI). While Avis Budget and Cross Country Healthcare sport a Zacks Rank #1, Charles River Associates carries a Zacks Rank #2 (Buy) at present.
Avis Budget has an expected earnings growth rate of 420.6% for the current year. The company has a trailing four-quarter earnings surprise of 76.9%, on average.
Avis Budget’s shares have surged 744.3% in the past year. The company has a long-term earnings growth of 18.8%.
Cross Country Healthcare has an expected earnings growth rate of 447.8% for the current year. The company has a trailing four-quarter earnings surprise of 75%, on average.
Cross Country Healthcare’s shares have surged 201% in the past year. The company has a long-term earnings growth rate of 21.5%.
Charles River Associates has an expected earnings growth rate of 61.2% for the current year. The company has a trailing four-quarter earnings surprise of 51%, on average.
Charles River’s shares have surged 119.3% in the past year. The company has a long-term earnings growth of 15.5%.
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