Business services provider ABM Industries Incorporated (ABM) reported first quarter fiscal 2014 adjusted earnings of 25 cents per share, in sync with the Zacks Consensus Estimate. The company noted that it’s fiscal first quarter results surpassed expectations. However, it compared unfavorably with the year-ago adjusted tally of 26 cents, which benefited from a lower share count.
GAAP earnings for the reported quarter were $13.1 million or 23 cents per share compared with $13.4 million or 24 cents per share in the year-earlier quarter. The year-over-year decline in net income was primarily due to a high provision for income tax during the reported quarter.
Total quarterly revenue increased 3.8% year over year to $1,226.5 million with healthy organic growth from new business and expansion of services. Revenues for the reported quarter, however, missed the Zacks Consensus Estimate of $1,236 million.
Segment Performance
Janitorial: Quarterly revenues from the segment increased a record 4.6% year over year to $637.1 million due to significant new business wins and robust discretionary tag sales. However, segment operating profit declined 1.0% to $29.1 million owing to higher initial costs associated with a new contract.
Facility Services: Revenues decreased 3.0% year over year to $151.7 million, while operating profit declined 10.2% to $8.1 million.
Parking: Revenues from this segment were marginally down by 0.6% year over year to $150.3 million although operating profit expanded 17.1% to $5.7 million due to the termination of lower margin contracts and stringent cost management.
Security: The segment reported revenues of $99.7 million compared with $96.7 million in the year-ago quarter, representing a 3.2% year-over-year increase. Operating profit increased 55.5% to $2.6 million, benefiting from new business and sales associated with bundled services.
Building & Energy Solutions: Revenues from the segment were up 16.0% to $102.1 million, driven by a healthy government business and bundled energy solutions. Operating profits was $2.7 million versus an operating loss of 0.1 million in the year-ago quarter with stringent cost-cutting measures and benefits from investments in healthcare vertical and energy businesses.
Adjusted EBITDA improved 7.5% in the reported quarter to $41.5 million, driven by incremental contribution from recent acquisitions and new businesses.
ABM has a healthy pipeline of future businesses with strength particularly seen in its government business. The company expects to continue its bull run in the coming quarters as well with continued healthy margin improvements and seamless integration of acquired businesses. Management also reiterated that corporate restructuring initiatives were well on track to yield a sustained long-term growth momentum.
Financial Position
Cash and cash equivalents at quarter end were $34.2 million. Due to significant working capital requirements, net cash utilized in operations was $38.9 million for the reported quarter compared with $11.5 million in the prior-year period. Outstanding debt under its credit facility also increased to $367 million. ABM maintained its quarterly cash dividend at 15.5 cents per share, which represented its 192nd consecutive quarterly dividend.
Outlook
ABM reiterated its guidance for fiscal 2014. The company expects income from continuing operations in the range of $1.38 to $1.48 per share. Adjusted income is also expected in the range of $1.58 to $1.68 per share.
Moving Forward
ABM’s strategy entails growth through acquisitions. The company expects to extend its global footprint as well as strengthen its position in existing markets through successful integration and organic growth across industry verticals.
ABM presently has a Zacks Rank #3 (Hold). Players in the industry that warrant a look include ManpowerGroup Inc. (MAN), Team, Inc. (TISI) and Rollins Inc. (ROL), all of which carry a Zacks Rank #2 (Buy).
Be the first to comment