A Look at ABM Industries’ Risk Factors Amid Able Services Acquisition

ABM Industries (ABM) provides facility solutions. It serves clients across a broad range of industries, including aviation, education, and healthcare.

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Let’s take a look at the company’s latest financial performance, corporate developments, and risk factors.

ABM Industries’ Fiscal Q3 Financial Results and FY21 Outlook

Revenue increased 10.7% year-over-year to $1.54 billion in Fiscal Q3 ended July 31 and exceeded the consensus revenue estimate of $1.5 billion. The company said that revenue surged across all of its business segments. Adjusted EPS of $0.90 jumped 20% year-over-year and beat the consensus estimate of $0.81. (See ABM Industries stock charts on TipRanks).

ABM plans to distribute a quarterly cash dividend of $0.19 per share on November 1. The company ended Q3 with $505.4 million in cash and $811.6 million in debt.

For Fiscal 2021, the company raised its EPS outlook to a range of $3.45 – $3.55. It previously guided for EPS in the band of $3.30 – $3.50.

ABM Industries’ Corporate Developments

In August 2021, ABM signed an agreement to acquire Able Services for $830 million in cash. San Francisco-headquartered Able Services is a provider of engineering and janitorial services. It generates $1.1 billion in revenue. The transaction is expected to close by the end of September.

In other developments, ABM has been selected to provide the infrastructure solution for the electric bus in New York City. The company will install overhead electric vehicle chargers in bus depots in Brooklyn and Manhattan. It will also provide maintenance services on the charging equipment.

ABM Industries’ Risk Factors

The new TipRanks Risk Factors tool shows 27 risk factors for ABM Industries. Since Q4 2020, the company has updated its risk profile with six additional risk factors, all under the Finance and Corporate category.

ABM Industries tells investors that it plans to borrow money to complete the acquisition of Able Services. It cautions that servicing the debt could cause liquidity challenges. For example, it could face cash shortages for working capital or the funding capital of expenditures.

The company tells investors that there is no guarantee it will complete the Able acquisition, and that closing the transaction is subject to obtaining regulatory approvals, which are beyond its control. Also, the terms of the agreement include a clause that the deal will collapse if not completed by May 25, 2022. ABM cautions that failure to complete the acquisition could adversely impact its financial results and stock price.

Furthermore, ABM tells investors that even if it succeeds to acquire Able Services, there is no guarantee that it will achieve the anticipated benefits from the acquisition. It warns that its results from operations and stock price could be adversely affected as a result.

Finance and Corporate is ABM’s top risk category, accounting for 44% of the total risks. That is above the sector average of 37%. ABM’s shares have gained about 22% since the beginning of 2021.

Analysts’ Take

Following ABM Industries’ Fiscal Q3 report, Maxim Group analyst Tate Sullivan reiterated a Hold rating on ABM stock without assigning it a price target.

Consensus among analysts is a Moderate Buy based on 1 Buy and 2 Holds. The average ABM Industries price target of $48 implies 3.76% upside potential to current levels.