A month has gone by since the last earnings report for ABM Industries (ABM). Shares have added about 3.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is ABM Industries due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

ABM Industries Surpasses Q3 Earnings Estimates

ABM Industries reported impressive third-quarter fiscal 2022 results, with both earnings and revenues beating the Zacks Consensus Estimates.

Adjusted earnings (excluding 9 cents from non-recurring items) from continuing operations came in at 94 cents per share, beating the consensus mark by 3.3% and increasing 4.4% from last fiscal year’s quarterly figure. The bottom line benefited from increased operating earnings on higher revenues, partially offset by a decrease in the volume of higher-margin virus protection services and work orders, as well as higher direct and indirect costs, primarily for labor.

Total revenues of $1.96 billion also surpassed the consensus estimate by 1.8% and improved 27.1% from last fiscal year’s quarterly figure. The upside was backed by solid demand across ABM’s Business & Industry, Aviation, Manufacturing & Distribution, and Technical Solutions segments, especially in its eMobility business. Quarterly revenue growth includes 7.4% organic growth and a 19.7% upside from acquisitions.

Quarterly results benefited from accretive acquisitions, solid demand for ABM’s core janitorial and engineering services, and continued strong growth in eMobility. These were, however, partially offset by the expected decline in disinfection-related work orders and EnhancedClean services.

Let’s check out the numbers.

Segment-Wise Revenues

Business & Industry revenues increased 51.4% from last fiscal year’s quarterly figure to $1.03 billion. Manufacturing & Distribution revenues inched up 5.2% from last fiscal year’s quarterly figure to $358.1 million. Aviation revenues increased 21.3% from last fiscal year’s quarterly figure to $203.5 million. Technical Solutions revenues increased 9.3% from last fiscal year’s quarterly figure to $158.4 million. Education revenues of $207.5 million also inched up 0.3% from the prior-year fiscal quarter’s level.

Operating Results

Adjusted EBITDA came in at $125.5 million compared with $113.5 million in the year-ago quarter. Adjusted EBITDA margin was 6.6% compared with 7.7% in the year-ago quarter, primarily reflecting a change in service mix and cost increases.

Operating expenses increased 31.7% from the year-ago figure to $1.69 billion. Selling, general and administrative expenses declined 37.5% from the year-ago level to $158.6 million.

Balance Sheet & Cash Flow

ABM Industries exited third-quarter fiscal 2022 with cash and cash equivalents of $63.9 million compared with $48.9 million at the end of the prior fiscal quarter. Long-term debt was $1 billion compared with $986.6 million at the end of the prior fiscal quarter.

Net cash provided by operating activities totaled $40.7 million for the reported quarter. Free cash flow came in at $22.6 million.

Dividend Payout & Share Repurchase

ABM Industries’ board of directors declared a quarterly cash dividend of 19.5 cents per share. The dividend will be paid out on Nov 7, 2022, to its stockholders of record as of Oct 6, 2022. This marked the 226th consecutive quarterly cash dividend by ABM.

During the reported quarter, ABM repurchased 0.7 million shares at an average price of $41.92, for a total cost of $31.2 million.

Fiscal 2022 Guidance

For fiscal 2022, ABM Industries updated its guidance for adjusted EPS guidance, now expected in the range of $3.60-$3.70 (prior view: $3.50-$3.70) per share.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -13.48% due to these changes.

VGM Scores

Currently, ABM Industries has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise ABM Industries has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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