Why ABM Industries, Inc. (NYSE: ABM) stock is going gangbusters today

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ABM Industries, Inc. (NYSE: ABM) stock rose over 12% on June 7th, 2018 (as of 2:15 PM GMT-4 ; Source: Google finance) after the company in the second quarter of FY 18 has reported the adjusted earnings per share of $0.47, beating the analysts’ estimates for the adjusted earnings per share of $0.45. In the second quarter, ABM’s revenue grew 20.6% to $1,580.8 million, partially reflecting new bookings of approximately $460 million in annualized revenues for the first half of FY 18. For the second quarter of FY18, ABM has achieved record revenues of approximately $1.6 billion due to the acquisition of GCA, and organic growth of 4.5% primarily within the Business & Industry segment and parking and transportation wins within the Aviation segment.  The GCA acquisition provided $256.4 million of incremental revenues, which is predominantly reflected in the Education, Technology & Manufacturing, and Business & Industry segments in the amounts of $141.5 million, $60.6 million, and $42.5 million, respectively. Overall, in the second quarter, the net income is of $26.6 million compared to net income of $31.3 million. The second quarter reflects the absence of Government Services, which was sold on May 31, 2017.

Moreover, the company for the second quarter 2018 has reported the adjusted income from continuing operations of $31.2 million, compared to $27.8 million for the second quarter of fiscal 2017.  The income from continuing operations for the second quarter on both a GAAP and adjusted basis reflects higher GCA acquisition-related expenses, namely amortization and interest, as well as the impact of higher wage and overtime costs due to a tightening labor market.  Additionally, these results reflect 66.2 million weighted average shares outstanding on a diluted basis, an increase of approximately 10 million shares, primarily due to the GCA transaction.  This was partially offset by the benefit of a reduced overall corporate tax rate as a result of the U.S. Tax Cuts and Jobs Act of 2017.

Additionally, ABM has ended the second quarter with total debt, including standby letters of credit, of $1.3 billion. The total debt to proforma adjusted EBITDA was approximately 3.8x. In addition, the Company paid a quarterly cash dividend of $0.175 per common share for a total distribution of $11.5 million.

Meanwhile, for FY 18, ABM expects adjusted income from continuing operations to be in the range of $1.85 to $1.95 per diluted share for the 2018 fiscal year.

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