ABM Industries (ABM 3.52%) stock kicked off the trading week on a high note Monday, closing more than 3.5% higher in price following two recommendation upgrades from analysts tracking the stock. That performance was more than good enough to eclipse the bellwether S&P 500 index, which essentially flatlined that day.Investors overreacted to results, says analystThose pundit updates came one business day after ABM released its second quarter of fiscal 2025 earnings report. The company notched a minor beat on t ...

Core Insights - ABM Industries largely met Wall Street expectations for the quarter, but rising costs and full-year guidance imply potential risks of weakness compared to estimates [1] - Investors reacted defensively, leading to a 13% decline in ABM shares [1] Financial Performance - ABM reported earnings of $0.86 per share for the fiscal second quarter ending April 30, which was a penny shy of expectations, with revenue in line at $2.1 billion [3] - The quarter marked a return to organic revenue growth, driven by strength in the prime commercial office market, with revenue growth of 3.4% compared to a 3% rise in operating expenses and a 9% rise in selling, general, and administrative expenses [4] Market Outlook - The company secured $1.1 billion in new bookings in the first half of its fiscal year, reflecting an 11% increase [4] - CEO Scott Salmirs expressed a constructive outlook for core markets, particularly high-quality office buildings, manufacturing and distribution facilities, commercial aviation, and microgrids [5] - Projects delayed in the second quarter are expected to be realized in the third quarter [5] Investor Sentiment - Investors were looking for more acceleration than what ABM delivered, and given broader macro uncertainty, there appears to be more downside risk than upside in the coming months [6] - Concerns include potential slowdowns in manufacturing or layoffs affecting office building occupancy, which could negatively impact results [6]

Core Insights - ABM Industries reported revenue of $2.11 billion for the quarter ended April 2025, reflecting a year-over-year increase of 4.6% and a surprise of +2.24% over the Zacks Consensus Estimate of $2.07 billion [1] - The company's EPS was $0.86, slightly down from $0.87 in the same quarter last year, resulting in an EPS surprise of -1.15% compared to the consensus estimate of $0.87 [1] Revenue Performance - Business & Industry segment generated $1.02 billion, exceeding the average estimate of $1 billion, with a year-over-year change of +2.6% [4] - Aviation segment reported revenues of $260.10 million, slightly above the average estimate of $260.07 million, marking a year-over-year increase of +9.2% [4] - Education segment achieved revenues of $227.80 million, below the average estimate of $229.60 million, with a year-over-year change of +1% [4] - Manufacturing & Distribution segment reported $398.10 million, surpassing the average estimate of $380.52 million, reflecting a year-over-year increase of +2.4% [4] - Technical Solutions segment generated $210.20 million, below the average estimate of $224.17 million, but showing a significant year-over-year increase of +19.3% [4] Operating Profit Analysis - Operating profit for the Aviation segment was $16.50 million, below the average estimate of $18.70 million [4] - Business & Industry segment's operating profit was $83 million, compared to the average estimate of $86.81 million [4] - Manufacturing & Distribution segment reported an operating profit of $39.90 million, below the average estimate of $47.43 million [4] - Education segment's operating profit was $13.80 million, compared to the average estimate of $14.86 million [4] - Technical Solutions segment reported an operating profit of $13.40 million, below the average estimate of $19.22 million [4] - Corporate segment reported an operating loss of -$82.90 million, which was better than the average estimate of -$101.64 million [4] Stock Performance - Shares of ABM Industries have returned +1% over the past month, while the Zacks S&P 500 composite increased by +5.3% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Financial Data and Key Metrics Changes - The company achieved revenue of $2.1 billion, representing a 4.6% year-over-year growth driven by 3.8% organic growth and contributions from the acquisition of Quality Uptime Services [19][20] - Adjusted EPS was $0.86, up from $0.82 in the prior year, reflecting higher segment earnings and lower corporate costs [20] - Adjusted EBITDA was $125.9 million, compared to $121 million last year, with an adjusted EBITDA margin remaining flat at 6.2% [20][21] Business Line Data and Key Metrics Changes - The Building and Industrial (B and I) segment generated $1 billion in revenue, up 3% year-over-year, driven by improved conditions in the US prime commercial office market [21] - The Maintenance and Distribution (M and D) segment reported revenue of $398.1 million, a 2% increase year-over-year, returning to organic growth due to new contract wins and expansion with existing clients [23][24] - The Technical Solutions segment delivered 19% revenue growth to $210.2 million, with 10% from organic growth and 9% from the acquisition of Quality Uptime Services [25] Market Data and Key Metrics Changes - The prime vacancy rate for commercial office space decreased by 50 basis points year-over-year to 14.8%, indicating a recovery in the market [8] - E-commerce sales grew by 6.1% year-over-year, reaching $300.2 billion, representing 16.2% of total retail [14] - Domestic air travel remains strong, with TSA data showing daily screenings frequently exceeding 2.5 million in May [14] Company Strategy and Development Direction - The company is focusing on high-quality office properties, manufacturing and distribution facilities, and energy resiliency, expecting to benefit from delayed projects resuming in the third quarter [7][16] - The strategy includes evolving service offerings in M and D to include ancillary support services, enhancing client relationships and deepening strategic partnerships [10] - The company is prioritizing internal investments and is optimistic about the M and A pipeline, indicating a strong interest in acquiring companies that can enhance strategic value [96] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in core markets despite ongoing macroeconomic uncertainty, particularly in high-quality office properties and manufacturing [7][8] - The company anticipates continued organic growth in B and I and M and D, with expectations for strong performance in the second half of the year [44][70] - Management highlighted the importance of the ERP implementation in improving operational efficiency and cash flow [30] Other Important Information - The company ended the quarter with total indebtedness of $1.6 billion and available liquidity of $657.8 million [26][27] - Free cash flow for the quarter was $15 million, an improvement of $138 million over the first quarter, with expectations for continued improvement in the second half [27][28] - The company reaffirmed its full-year adjusted EPS guidance to be in the range of $3.65 to $3.80 [29] Q&A Session Summary Question: What is the expected earn-out on RavenBold? - The total earn-out for this year is expected to be about $30 million, with the previous year's earn-out being $75 million [36] Question: How is the company positioned for organic growth in the B and I business in the second half? - Management is optimistic about maintaining positive organic growth in B and I, despite potential choppiness [44] Question: Can you elaborate on the new solutions offered in the M and D segment? - The company is expanding its service offerings to include material handling and test balancing, which are expected to enhance client relationships and margins [51][53] Question: What is the breakdown of the $1.1 billion in new bookings? - The new bookings were evenly paced across the board, with significant contributions from various segments [61] Question: What is the status of project delays in ATS? - Project delays are primarily due to customer approvals, but management expects a normalization in the second half of the year [67] Question: How is the education segment performing? - The education segment is stable, with a good pipeline and strong renewals, although it is not expected to grow at double-digit rates [70][71]

Financial Data and Key Metrics Changes - Revenue grew 4.6% year over year to $2.1 billion, driven by 3.8% organic growth and contributions from the 2024 acquisition of Quality Uptime Services [19][20] - Adjusted net income was $54.1 million or $0.86 per diluted share, up from $52.3 million or $0.82 per diluted share last year [20] - Adjusted EBITDA was $125.9 million compared to $121 million last year, with an adjusted EBITDA margin flat at 6.2% [20] Business Line Data and Key Metrics Changes - B and I revenue reached $1 billion, up 3% from last year, driven by expansion with existing clients and improved conditions in the US prime commercial office market [21] - M and D generated $398.1 million, a 2% increase year over year, with operating profit at $39.9 million and a margin of 10% [23] - Technical solutions delivered 19% revenue growth to $210.2 million, with continued demand for microgrids and mission-critical power services [24] Market Data and Key Metrics Changes - The prime vacancy rate for commercial office space declined 50 basis points year over year to 14.8%, compared to the broader office market vacancy rate of 19% [7][12] - E-commerce sales grew 6.1% year over year, reaching $300.2 billion, representing 16.2% of total retail [13] - Domestic air travel remains strong, with TSA data showing daily screenings frequently exceeding 2.5 million in May [14] Company Strategy and Development Direction - The company is focusing on high-quality office properties, manufacturing and distribution facilities, and energy resiliency [6][16] - There is a strategic shift in M and D from traditional cleaning to include ancillary support services, enhancing client relationships [9] - The company is investing in technical sales and industry-specific capabilities to capture growth in key sectors like semiconductors and data centers [9][16] Management's Comments on Operating Environment and Future Outlook - Management remains confident in core markets despite ongoing macroeconomic uncertainty, expecting delayed projects from Q2 to resume in Q3 [6][17] - The company is optimistic about sustaining healthy top-line growth and expanding margins over time [17] - Management highlighted the importance of the ERP implementation for operational efficiency and cash flow improvements [11][30] Other Important Information - Total indebtedness at the end of Q2 was $1.6 billion, with available liquidity of $657.8 million [26][27] - The company reaffirmed its full-year adjusted EPS guidance to be in the range of $3.65 to $3.80 [29] Q&A Session Summary Question: What is the expected earn-out on RavenBold? - The total earn-out for this year is expected to be about $30 million, with a total of approximately $280 million including previous amounts [36][38] Question: How is organic growth expected in the B and I business for the second half? - Management is optimistic about maintaining positive organic growth in B and I, despite potential choppiness [44] Question: Can you elaborate on the new service offerings in M and D? - The company is expanding its service offerings to include material handling and test balancing, which are expected to enhance client relationships and margins [49][53] Question: How is the company positioned in prime office markets? - The company has been winning in prime office markets due to strong execution, relationships, and investments in technology [86][88] Question: What is the outlook for ATS margins and project delays? - Project delays are expected to normalize in the second half, with margins anticipated to return to historical levels of 9% to 10% [68] Question: What is the current state of the education segment? - The education segment is stable, with a strong pipeline and good growth in renewals, supported by investments in facilities [70][72]

Core Insights - ABM Industries reported quarterly earnings of $0.86 per share, missing the Zacks Consensus Estimate of $0.87 per share, and down from $0.87 per share a year ago [1] - The company posted revenues of $2.11 billion for the quarter, exceeding the Zacks Consensus Estimate by 2.24% and up from $2.02 billion year-over-year [3] Earnings Performance - The earnings surprise for the quarter was -1.15%, while the previous quarter saw an earnings surprise of 11.54% [2] - Over the last four quarters, ABM Industries has surpassed consensus EPS estimates three times [2] Revenue Performance - ABM Industries has topped consensus revenue estimates four times over the last four quarters [3] Stock Performance - Since the beginning of the year, ABM Industries shares have increased by about 0.2%, compared to a 1% gain in the S&P 500 [4] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $0.97 on revenues of $2.16 billion, and for the current fiscal year, it is $3.76 on revenues of $8.58 billion [8] - The estimate revisions trend for ABM Industries is currently favorable, resulting in a Zacks Rank 2 (Buy) for the stock, indicating expected outperformance in the near future [7] Industry Context - The Business - Services industry, to which ABM Industries belongs, is currently in the top 15% of over 250 Zacks industries, suggesting a positive outlook for stocks in this sector [9]

Revenue Growth - Revenues increased by $93.5 million, or 4.6%, to $2,111.7 million for the three months ended April 30, 2025, driven by organic growth of 3.7% and acquisition growth of 0.8%[100] - Revenues increased by $138.8 million, or 3.4%, to $4,226.6 million for the six months ended April 30, 2025, compared to the prior year period, driven by organic growth of 2.6% and acquisition growth of 0.7%[125] - Business & Industry segment revenues rose by $25.9 million, or 2.6%, to $1,015.5 million, primarily due to client expansions domestically and internationally[112] - Technical Solutions segment revenues increased by $34.0 million, or 19.3%, to $210.2 million, with organic growth of 9.8% and acquisition growth of 9.5%[120] - Aviation segment revenues grew by $21.9 million, or 9.2%, to $260.1 million, attributed to new business and scope expansions with existing clients[116] - Technical Solutions segment revenues increased by $70.3 million, or 20.5%, to $412.4 million, driven by organic growth of 12.0% and acquisition growth of 8.5%[144] - Aviation segment revenues increased by $42.4 million, or 8.7%, to $530.2 million, attributed to new business and scope expansions with existing clients[140] Operating Profit and Margins - Operating profit rose by $1.0 million to $82.3 million during the same period, attributed to revenue increases and operational efficiencies[100] - Operating profit for the consolidated entity increased by $4.5 million, or 2.9%, to $159.9 million for the six months ended April 30, 2025[124] - Operating profit margin for the Business & Industry segment improved by 34 bps to 8.2%[113] - Operating profit margin for the Aviation segment increased by 85 bps to 6.3%[117] - Operating profit for the Technical Solutions segment increased by $6.5 million, or 27.6%, to $30.0 million, with an operating profit margin increase of 40 bps to 7.3%[145] Operating Expenses - Operating expenses increased by $77.5 million, or 4.4%, to $1,841.0 million, with a gross margin improvement of 19 basis points to 12.8%[103] - Corporate expenses rose by $3.2 million, or 4.0%, to $82.9 million, primarily due to increased costs associated with systems' go-live and acquisition integration[122] - Operating expenses increased by $106.3 million, or 3.0%, to $3,696.1 million for the six months ended April 30, 2025, compared to the prior year period[126] Cash Flow and Financing - Net cash used in operating activities was $73.9 million for the six months ended April 30, 2025, compared to net cash provided of $116.9 million in the prior year period[100] - Net cash provided by financing activities was $98.7 million for the six months ended April 30, 2025, compared to a cash outflow of $98.0 million in the prior year, driven by increased borrowings from the Amended Credit Facility[163] - The total outstanding borrowings under the Amended Credit Facility were $1.6 billion, with a weighted average interest rate of 6.07% as of April 30, 2025[154] - The Amended Credit Facility was amended to increase the revolving credit capacity from $1.3 billion to $1.6 billion and extend the maturity date to February 26, 2030[152] Strategic Initiatives - The ELEVATE strategy involves investments totaling $200 - $215 million aimed at enhancing client and team member experiences and leveraging technology[96] - The Quality Uptime Acquisition contributed an additional $16.6 million in revenue, completed in June 2024, supporting overall revenue growth[102] - The company anticipates long-term cash uses may include strategic acquisitions and plans to reinvest foreign earnings for non-U.S. growth[155][150] Other Financial Metrics - Interest expense increased by $3.3 million, or 16.1%, to $23.9 million, driven by higher borrowings from the Amended Credit Facility[106] - Effective tax rate on income from operations increased to 25.6% for the six months ended April 30, 2025, from 24.0% in the prior year[130] - Foreign currency translation gain increased to $6.7 million during the six months ended April 30, 2025, compared to a gain of $3.7 million in the prior year[133] - The company remains in compliance with the covenants of the Amended Credit Facility, which includes a maximum total net leverage ratio of 5.00 to 1.00[153] Shareholder Returns - Dividends of $32.9 million were paid to shareholders, with a declared dividend of $0.530 per common share during the six months ended April 30, 2025[100] - The company has $133.2 million remaining under its share repurchase program as of April 30, 2025, although no shares were repurchased during the three months ended April 30, 2025[158]

Revenue and Income - Revenue increased by 4.6% to $2.1 billion, with organic growth contributing 3.8%[6] - Net income for the quarter was $42.2 million, or $0.67 per diluted share, compared to $43.8 million, or $0.69 per diluted share in the prior year[8] - Adjusted net income grew to $54.1 million, or $0.86 per diluted share, compared to $52.3 million, or $0.82 per diluted share last year[9] - Operating profit for the same period rose by 1.2% to $82.3 million, up from $81.3 million[32] - Net income decreased by 3.7% to $42.2 million, compared to $43.8 million in the prior year[32] - Basic net income per share fell by 2.9% to $0.67 from $0.69[26] - Net income for the six months ended April 30, 2025, decreased by 3.0% to $85.8 million from $88.4 million in 2024[33] - Adjusted net income for the six months ended April 30, 2025, was $109.4 million, an increase from $103.3 million in 2024[34] Earnings and Adjusted Metrics - Adjusted EBITDA for the period increased to $125.9 million, with an adjusted EBITDA margin of 6.2%[9] - Adjusted EBITDA for the six months ended April 30, 2025, was $246.6 million, compared to $232.3 million in 2024, reflecting a solid operational performance[34] - The company reaffirms its full year adjusted EPS outlook of $3.65 to $3.80[14] Cash Flow and Financial Position - Cash flow from operations increased by $138.5 million compared to the previous quarter, highlighting progress in ERP system deployment[11] - Net cash provided by operating activities for the three months ended April 30, 2025, was $32.3 million, a significant decrease from $117.0 million in 2024[29] - Free cash flow for the six months ended April 30, 2025, was $(107.8) million, a decrease from $87.7 million in 2024, indicating cash flow challenges[36] - Total current assets increased to $2,014.1 million from $1,788.7 million, reflecting a growth of 12.6%[31] - Total liabilities rose to $3,486.3 million, up from $3,315.2 million, indicating an increase of 5.2%[31] - Total indebtedness stood at $1.6 billion, resulting in a total leverage ratio of 2.9X[12] Segment Performance - The Business & Industry segment grew by 3%, supported by recovery in the U.S. prime office space market[7] - ATS revenue increased by 19%, benefiting from significantly higher microgrid revenue[7] - The Technical Solutions segment saw a revenue increase of 19.3% to $210.2 million compared to $176.2 million in the previous year[32] - The Technical Solutions segment experienced the highest revenue growth of 20.5%, reaching $412.4 million, compared to $342.1 million in the previous year[33] - The company reported an increase in aviation revenue by 8.7%, reaching $530.2 million compared to $487.8 million in 2024[33] Dividends and Expenses - Dividends declared per common share increased to $0.265 from $0.225, representing an increase of 17.8%[26] - Interest expense decreased by 16.1% to $23.9 million from $20.6 million, reflecting improved cost management[32] - The company incurred $33.0 million in items impacting comparability for the six months ended April 30, 2025, up from $21.1 million in 2024[34]

Core Insights - ABM reported a return to organic revenue growth in its Business & Industry segment, achieving 3.8% organic revenue growth and a total revenue increase of 4.6% to $2.1 billion for the second quarter of fiscal 2025 [2][4][7] - The company secured $1.1 billion in new bookings, marking an 11% year-over-year increase, indicating strong market positioning and innovation focus [2][4] - Adjusted net income rose to $54.1 million, or $0.86 per diluted share, compared to $52.3 million, or $0.82 per diluted share, in the prior year [6][7] Financial Performance - Revenue for the second quarter increased to $2.1 billion, driven by 3.8% organic growth and a 0.8% contribution from acquisitions [4][7] - Net income for the quarter was $42.2 million, or $0.67 per diluted share, down from $43.8 million, or $0.69 per diluted share, in the prior year [5][7] - Adjusted EBITDA for the period increased to $125.9 million, maintaining an adjusted EBITDA margin of 6.2% [8][7] Segment Performance - The Business & Industry segment grew by 3%, supported by recovery in the U.S. prime office space market [4][28] - The Manufacturing & Distribution segment saw a 2% increase, attributed to new client wins and favorable comparisons to the prior year [4][28] - Technical Solutions and Aviation segments reported significant revenue increases of 19% and 9%, respectively, with Technical Solutions benefiting from higher microgrid revenue [4][28] Cash Flow and Liquidity - Net cash provided by operating activities was $32.3 million, a decrease from $117.0 million in the prior year, primarily due to elevated working capital related to the ERP transition [9][23] - Free cash flow for the quarter was $15.2 million, down from $101.4 million in the previous year [9][32] - The company had total indebtedness of $1.6 billion and available liquidity of $657.8 million at the end of the second quarter [10][9] Outlook - ABM reaffirmed its fiscal year 2025 adjusted EPS outlook in the range of $3.65 to $3.80, with an unchanged projected adjusted EBITDA margin of 6.3% to 6.5% [12][7] - The company remains optimistic about core markets, particularly high-quality office buildings, manufacturing and distribution facilities, and commercial aviation [2][12]

Core Viewpoint - Analysts project that ABM Industries will report quarterly earnings of $0.87 per share, with revenues expected to reach $2.07 billion, reflecting a 2.3% increase year over year [1] Earnings Estimates - The consensus EPS estimate has been revised downward by 1% over the past 30 days, indicating a collective reassessment by analysts [2] - Changes in earnings estimates are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock price performance [3] Revenue Projections - Analysts estimate 'Revenues- Business & Industry' will reach $1.00 billion, a 1.3% increase from the previous year [5] - 'Revenues- Aviation' is projected at $260.07 million, reflecting a 9.2% increase year over year [5] - 'Revenues- Education' is expected to be $229.60 million, indicating a 1.8% increase [5] - 'Revenues- Manufacturing & Distribution' is forecasted at $380.52 million, showing a 2.1% decrease [6] - 'Revenues- Technical Solutions' is estimated at $224.17 million, a significant increase of 27.2% [6] Operating Profit Estimates - 'Operating profit- Aviation' is expected to be $18.70 million, up from $13.10 million in the same quarter last year [7] - 'Operating profit- Business & Industry' is projected at $86.81 million, compared to $77.60 million in the prior year [7] - 'Operating profit (loss)- Manufacturing & Distribution' is estimated at $47.43 million, up from $43.60 million year over year [8] - 'Operating profit- Education' is forecasted at $14.86 million, compared to $11.50 million in the same quarter last year [8] - 'Operating profit- Technical Solutions' is expected to be $19.22 million, compared to $17 million in the previous year [9] Stock Performance - Shares of ABM Industries have increased by 5.1% over the past month, outperforming the Zacks S&P 500 composite, which moved up by 4.6% [10] - ABM Industries holds a Zacks Rank 2 (Buy), indicating expectations of outperforming the overall market in the near future [10]