ABM Industries Inc. ABM reported strong first-quarter fiscal 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate.
Adjusted earnings (from continuing operations) came in at 39 cents per share, which outpaced the consensus mark as well as the year-ago quarter’s reported figure by 25.8%. The bottom line benefited from higher margin revenue mix primarily within the Business & Industry segment and lower interest related to the company's reduced leverage profile, which were, however, partially offset by its ongoing investments to optimize operational and technological infrastructure.
Total revenues of $1.61 billion beat the consensus estimate as well as the year-ago quarter by 0.3%. The top line benefited from the Technical Solutions segment, which was partially offset by lower retention stemming from fiscal 2019, including the loss of lower margin contracts, primarily within the Aviation and Business & Industry segments.
Over the past year, shares of ABM Industries have gained 4.4% against the industry’s loss of 6.6%.
Revenues by Segment
Business & Industry revenues (51% of total revenues) decreased 1% year over year to $820.9 million. Aviation revenues (15%) decreased 5.4% year over year to $238.7 million. Technology & Manufacturing revenues (15%) declined 0.9% year over year to $233.9 million. Education revenues (13%) of $208 million decreased 0.5% from the prior-year quarter.
Technical Solutions revenues (10%) increased 22.4% year over year to $142 million.
Operating Results
Adjusted EBITDA of $68.8 million was flat year over year. Also, adjusted EBITDA margin of 4.3% came in line with the year-ago quarter.
Adjusted income from continuing operations was $26.2 million, up 25.9% year over year. Operating expenses decreased 0.8% from the year-ago quarter to $1.43 billion. Selling, general and administrative expenses increased 4.4% from the year-ago quarter to $117.6 million.
Balance Sheet & Cash Flow
ABM Industries exited first-quarter fiscal 2020 with cash and cash equivalents of $69.8 million compared with $58.5 million at the end of the prior quarter. Long-term debt was $786.3 million compared with $744.2 million at the end of the prior quarter.
Net cash used in operating activities totaled $34.3 million in the reported quarter. Free cash flow came in at $45.8 million.
Dividend Payout & Share Repurchases
ABM Industries paid out a quarterly cash dividend of 18.5 cents per share, leading to $12.3 million of total dividend payout in the reported quarter. Additionally, the company’s board of directors announced a cash dividend of 18.5 cents per share, payable on May 4, 2020, to its shareholders of record as of Apr 2. This marks the 216th consecutive quarterly cash dividend declared by the company.
ABM Industries did not repurchase any of its shares during the reported quarter. As of Jan 31, 2020, the company had $150 million authorized shares available for repurchase under its share repurchase program.
Fiscal 2020 Guidance
ABM Industries reaffirmed its fiscal 2020 guidance. The company continues to expect adjusted income from continuing operations in the range of $1.90-$2.10 per share.
Zacks Rank & Stocks to Consider
Currently, ABM Industries carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Interpublic IPG, Omnicom (NYSE:OMC) and Genpact G, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term expected EPS (three to five years) growth rate for Interpublic, Omnicom and Genpact is 4.5%, 5.6% and 13.9%, respectively.
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