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Bear Of The Day: ABM Industries (ABM)

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ABM Industries (ABM - Free Report) is a Zacks Rank #5 (Strong Sell) but still sports some solid Zacks Style Scores.  I see a C for Value and an A for Growth, but the chart tells a bad story as the stock has slid from the low 40's to the mid 30's over the last two months.  Let's take a look at why this stock is a Zacks Rank #5 (Strong Sell) in this Bear Of The Day article.

Description

ABM Industries Inc. is a leading provider of facility solutions throughout the United States and various international locations. ABM's comprehensive capabilities include janitorial, electrical & lighting, energy solutions, facilities engineering, HVAC & mechanical, landscape & turf, mission critical solutions and parking, provided through stand-alone or integrated solutions. ABM provides custom facility solutions in urban, suburban and rural areas to properties of all sizes - from schools and commercial buildings to hospitals, data centers, manufacturing plants and airports. ABM Industries, Inc. provides parking and security services to thousands of commercial, industrial and institutional customers who outsource these services in hundreds of cities across North America.

Earnings History

I see a really good earnings history for ABM. Four of the last four reports have all come in ahead of the Zacks Consensus Estimate.  

The average positive earnings surprise over the last year has been 8.6%, with two reports coming in more than 14% ahead of expectations.

Estimate Revisions

The foundation of the Zacks Rank is the move in earnings estimate revisions.  When a stock sees negative revisions, the Rank slides and that is generally not good news for investors.

I see estimate coming in across the board.  This quarter, next quarter, this year and next year are all seeing decreases in estimates.

The good news is that it is just a few pennies in each time period... so it can easily be made up.  The key is to right the ship as soon as possible and get estimates moving back higher.

Valuation

With estimates coming in and the stock falling, the valuation tends to look a little better.  For ABM, that is the case with a 17x forward earnings multiple and a 1.5x book multiple.  Those are both good numbers when you have 1.5% topline growth, but the 0.3x price to sales multiple gives me pause as it tells me the market doesn't value incremental sales by the company.

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