ABM Industries Incorporated ABM reported second-quarter fiscal 2015 adjusted earnings of 37 cents per share, which exceeded the Zacks Consensus Estimate by a couple of cents. The adjusted earnings per share also compared favorably with the year-ago adjusted tally of 33 cents.
GAAP earnings for the reported quarter were $18.3 million or 32 cents per share compared with $15.2 million or 27 cents per share in the year-earlier quarter. The year-over-year increase in earnings was primarily attributable to record revenues for the second quarter, driven by healthy organic and inorganic growth.
Total revenue increased 3.2% year over year to an all-time quarterly high of $1,270.1 million with 3.2% organic growth and accretive acquisitions. Revenues for the reported quarter, however, missed the Zacks Consensus Estimate of $1,282 million.
Segment Performance
Quarterly revenues for the Janitorial segment increased 4.4% year over year to $659.5 million due to new contract wins, healthy tag sales and accretive acquisitions. Segment operating profit improved 7.3% to $39.9 million owing to lower labor costs associated with safety initiatives, realignment savings and new business.
Revenues from the Facility Services segment declined 2.5% year over year to $145.8 million, while operating profit increased 32.0% to $6.6 million.
Revenues from the Parking segment were up 0.6% year over year to $153.5 million, while operating profit expanded 11.7% to $6.7 million due to stringent cost management.
The Security segment revenues decreased marginally to $93.7 million from $93.8 million in the year-ago quarter. Operating profit was up 30.0% to $2.6 million.
Revenues from the Building & Energy Solutions segment were up 2.5% to $121.5 million, driven by strong inorganic growth and contribution from new jobs. Operating profit, however, declined 8.6% to $3.2 million due to lower project-oriented revenues owing to seasonality issues.
Revenues from Other segment improved 12.8% year over year to $96.1 million due to strong organic growth in Air Serv, while operating profit increased 25.0% to $3.0 million.
Total adjusted operating profit improved 5% year over year to $35.9 million, while total adjusted EBITDA increased 6.3% to $52.5 million.
ABM has a healthy pipeline of future businesses with strength particularly seen in its government business. The company expects to improve its profitability in the coming quarters with seamless integration of acquired businesses and newer contracts. Management also reiterated that corporate restructuring initiatives were well on track to yield sustained long-term growth momentum.
CTS Acquisition
Subsequent to the quarter end, ABM‘s Building & Energy Solutions expanded its HVAC (heating, ventilating, and air conditioning) business with the acquisition of CTS Services/Facility Support Services for an undisclosed amount.
CTS Services/Facility Support Services have operations mainly in Texas, West VA, greater DC and Baltimore areas. It possesses expertise in providing premium HVAC services and energy solutions to government, commercial and industrial sectors. The acquisition is expected to add substantial experience in mission critical facilities to ABM’s existing portfolio and expand mechanical and energy solutions business, ensuring a comprehensive set of service options.
Financial Position
Cash and cash equivalents at quarter end were $30.4 million. Net cash provided by operations was $71.4 million compared with $76.6 million in the prior-year period. Total outstanding debt was $307.0 million with $376.9 million of borrowing capacity available under its $800.0 million line of credit.
ABM maintained its quarterly cash dividend of 16 cents per share for the third quarter, which represents its 197th consecutive quarterly dividend payment. The company also repurchased 313,242 shares for $10.0 million during the quarter.
Outlook
ABM reiterated its guidance for fiscal 2015. The company continues to expect adjusted income in the range of $1.75 to $1.85 per share. GAAP net income is expected to range from $1.55 to $1.65 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 #2 (Buy). Other players in the industry that warrant a look include CBIZ, Inc. CBZ, CRA International Inc. CRAI and FTI Consulting, Inc. FCN, each carrying a Zacks Rank #2 (Buy).
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