ABM Industries Faces Challenges Despite Earnings Beat in Q4 FY24

ABM Industries Inc. is experiencing a decline in its stock prices following the release of its earnings report for the fourth quarter of fiscal year 2024.

During this quarter, ABM reported a 4.0% increase in sales compared to the previous year, reaching a total of $2.18 billion. This figure surpassed analyst expectations, which had anticipated revenues of $2.079 billion. The revenue growth was notably propelled by strong performance in the Technical Solutions segment, which saw a remarkable 35% year-over-year growth, and the Aviation services, which grew by 11%. However, the Education segment's revenue remained unchanged year-over-year.

On the downside, operating expenses rose by 5.4%, totaling $1.91 billion, leading to a significant decline in operating profit, which fell by 81.9% to $19.2 million during the quarter.

Adjusted EBITDA also declined by 11%, landing at $128 million, which resulted in a margin of 6.1% compared to 7.2% from the same period last year. The adjusted earnings per share (EPS) were reported at $0.90, down 11% year-over-year but above the consensus estimate of $0.87.

Operating cash flow for this quarter was reported at $30.3 million, a drop from $139.1 million from the previous year. At the end of October, ABM reported holding cash and equivalents totaling $64.6 million.

In terms of shareholder returns, ABM declared a cash dividend of $0.265 per common share, which will be payable on February 3, 2025, to shareholders recorded by January 2, 2025. This dividend reflects a 17.8% increase over the prior quarterly payment.

Scott Salmirs, the President and CEO, highlighted that the significant growth in their microgrid service line and gains in the Aviation sector were critical in overcoming other challenges faced by the business. He mentioned that these results align with ABM's strategy to diversify its services.

Looking ahead, Salmirs commented on the uncertain macroeconomic environment post-election, but noted that data indicates the potential for growth in key commercial real estate markets. Parts of ABM's business continue to show healthy market conditions, which could bode well for the company moving forward.

Outlook for 2025

For fiscal year 2025, ABM anticipates adjusted EPS between $3.60 and $3.80, compared to the consensus estimate of $3.66. The company expects an adjusted EBITDA margin ranging from 6.3% to 6.5%. ABM is optimistic about revenue, margin, and earnings growth in 2025, citing a favorable business backdrop.

Market Response

As a result of these developments, ABM shares have fallen by 8.58%, trading at $50.20 as of the latest check on Wednesday.

Earnings, Shares, Growth