American Home Shield is one of the country’s premier insurance titans. This private company is licensed under the name American Home Shield Corporation. As a leading provider of US home warranty services, American Home Shield (AHS) provides comprehensive options to cover the replacement or repair of various home systems and components. A nationwide pool of service professionals is contracted to this company, which is based out of Memphis, Tennessee.
American Home Shield was a subsidiary of ServiceMaster Global Holdings Inc. However, ServiceMaster announced in July 2017 that AHS will become a separate publicly traded company by Q3 2018. This would make separate American Home Shield’s operations from those of Franchise Services Group and Terminix. Investors looking to cash in on the AHS spinoff will be heartened to know that it is the nation’s biggest Home Warranty Leader. This means that American Home Shield leads the way in the replacement, repair and servicing of home appliances, home components and home systems.
Owing to its massive nationwide brand recognition and superior service options, AHS has huge market potential in a largely fragmented home warranty market. The company sports some 2 million registered customers in the US, with an estimated 14,000 contractors. The holding company, ServiceMaster Global Holdings Inc. is a publicly traded entity on the New York Stock Exchange, under the ticker SERV. The company’s stock price is currently around $46.77 per share, with a market capitalization of $6.241 billion and a price/earnings ratio of 28.52. With an earnings per share of $1.64, and a 1-year target estimate price of $48.57, SERV is on the ascendancy.
Actual Versus Forecast Performance of ServiceMaster Global Holdings Inc.
However, the actual versus estimate earnings of SERV have whipsawed wildly since Q3 2016. Consider the following financial figures and forecasts over the past 1 year:
- In Q3 2016 the estimate earnings were $0.62 and the actual earnings were $0.59.
- In Q4 2016, the estimate earnings were $0.40 and the actual earnings were $0.44.
- In Q1 2017, the estimate earnings were $0.38 and the actual earnings were $0.34.
- In Q2 2017, the actual earnings and the estimates came in on target at $0.69 apiece.
- In Q3 2017, the estimate earnings were $0.61 and actual earnings will be released around October 23 through October 27, 2017.
For the year to date, SERV has appreciated from $37.68 per share to its prevailing price of $46.77 per share. This indicates clear upward momentum which bodes well for investors looking to get in on the ground floor when AHS lists in Q3 2018.
When will AHS File the Paperwork?
The tax-free spinoff is likely to be completed by Q3 2018, but details of the specific transaction have yet to be released. American Home Shield and ServiceMaster Global Holdings Inc will be based in Memphis, Tennessee, and shareholders will not be required to vote on the spin-off. The new CEO of ServiceMaster is Nikhil Varty, having replaced Rob Gillette in July.
A comprehensive AHS review by industry experts reveals that American Home Shield will be better positioned to offer a wide range of services to clients now that it has full autonomy to operate as it sees fit. This will also bode well for long-term growth and access to capital markets. The company has a large and stable customer base, and owing to its dominant position in the industry is an innovative key market player. With massive scale and countrywide brand recognition, investors can certainly benefit from the value-added appeal of this soon to be listed public entity.
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