ABM Industries Inc. Faces Challenges Despite Positive Q4 Earnings Results

ABM Industries Inc. experienced a decline in share value following the announcement of its fourth-quarter financial results for FY24.

Sales for the quarter rose by 4.0% compared to the previous year, reaching $2.18 billion, which surpassed analysts' expectations of $2.079 billion. The company attributed this growth to its Technical Solutions segment, which saw an impressive increase of 35% year-over-year, and its Aviation segment, which grew by 11%. However, revenue from the Education sector remained unchanged compared to the previous year.

On the expenses front, operating costs escalated by 5.4%, totaling $1.91 billion. Consequently, operating profit plummeted by 81.9%, amounting to only $19.2 million for the quarter.

In terms of adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), ABM recorded a decline of 11%, bringing the total to $128.0 million. The adjusted EBITDA margin also fell, standing at 6.1%, down from 7.2% in the same quarter last year. Adjusted earnings per share (EPS) were reported at $0.90, representing a decrease of 11% year-over-year but still beating market expectations of $0.87.

Operating cash flow for this quarter was $30.3 million, a significant drop from the $139.1 million reported a year prior. As of the end of October, the company held cash and cash equivalents amounting to $64.6 million.

Additionally, ABM has announced a cash dividend of $0.265 per common share, which is scheduled to be paid to shareholders on February 3, 2025, with a record date of January 2, 2025. This dividend marks a notable increase of 17.8% compared to the previous quarterly cash dividend.

Scott Salmirs, ABM's President and CEO, commented, "The significant growth of our microgrid service line and the market gains we made in Aviation were critical to overcoming challenges in other parts of the business. These results support our diversification strategy."

He also noted that while the overall economic outlook remains uncertain following recent elections, preliminary data indicates that key commercial real estate markets are approaching a period of growth. Furthermore, other segments of ABM's business continue to show signs of robust market conditions.

2025 Projections

Looking ahead, ABM projects that its adjusted EPS for FY25 will fall between $3.60 and $3.80, compared to the consensus estimate of $3.66. The company anticipates an adjusted EBITDA margin of 6.3% to 6.5% and expects growth in revenue, margin, and earnings for the upcoming year, buoyed by a favorable market environment.

Current Market Response

Despite the positive revenue growth, ABM shares saw a decline of 8.58%, trading at $50.20 at the latest market check on Wednesday.

ABM, Earnings, Revenue