Struggling Office Market Can Curb ABM's B&I Segment Growth: Analyst

Truist Securities analyst Jasper Bibb initiated ABM Industries Inc ABM with a Hold rating with a price target of $43.

The analyst sees ABM's office exposure (~40% of revenue) as the primary concern, hitting B&I segment growth, and expects the protracted downturn as a risk to FY25 estimates.

Bibb says achieving the consensus estimate of ~9% EPS growth in FY25 would require the office market trends to stabilize over the next 12 months.  

The analyst estimates ABM to generate adj. FCF of $4.84/share in CY24E, implying shares currently trade at a compelling 12% FCF yield. 

The analyst notes that ABM has made significant progress in improving adj. EBITDA margins to 6.5% in FY23 from 4.2% in FY15.

The analyst says that the variable labor model, labor productivity gains, and overhead cost savings (led by the ELEVATE program) indicate margins for FY25 of only 6.2% 6.

Bibb estimates EPS of $3.28 (vs. consensus of $3.30) for FY24 and $3.55 (vs. street view of $3.61) for FY25. 

In September, ABM reported Q3 FY23 revenue growth of 3.4% Y/Y to $2.028 billion, beating the consensus of $2.01 billion, and adjusted EPS of $0.79 missed the consensus of $0.89.

Price Action: ABM shares are trading lower by 0.41% at $39.83 on the last check Monday.

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorEquitiesNewsPrice TargetInitiationSmall CapMarketsAnalyst RatingsTrading IdeasBriefsExpert Ideas
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!