ABM (NYSE:ABM) Posts Better-Than-Expected Sales In Q1

Facility services provider ABM Industries (NYSE: ABM) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 4.6% year on year to $2.11 billion. Its non-GAAP profit of $0.86 per share was in line with analysts’ consensus estimates.

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“ABM’s second quarter performance was highlighted by a return to organic revenue growth in our Business & Industry (“B&I”) segment, driven by improving conditions in our prime commercial office markets,” said Scott Salmirs, President & Chief Executive Officer.

Company Overview

With roots dating back to 1909 as a window washing company, ABM Industries (NYSE: ABM) provides integrated facility management, infrastructure, and mobility solutions across various sectors including commercial, manufacturing, education, and aviation.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $8.50 billion in revenue over the past 12 months, ABM is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, ABM’s 5.8% annualized revenue growth over the last five years was decent. This shows its offerings generated slightly more demand than the average business services company, a useful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. ABM’s recent performance shows its demand has slowed as its annualized revenue growth of 3.4% over the last two years was below its five-year trend.

We can better understand the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, ABM’s organic revenue averaged 2.9% year-on-year growth. Because this number aligns with its normal revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, ABM reported modest year-on-year revenue growth of 4.6% but beat Wall Street’s estimates by 2.1%.

Looking ahead, sell-side analysts expect revenue to grow 2.3% over the next 12 months, similar to its two-year rate. This projection is underwhelming and indicates its products and services will see some demand headwinds.

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Operating Margin

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

ABM was profitable over the last five years but held back by its large cost base. Its average operating margin of 4% was weak for a business services business.

Looking at the trend in its profitability, ABM’s operating margin decreased by 3 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. ABM’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, ABM generated an operating margin profit margin of 3.9%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

ABM’s EPS grew at a solid 9.7% compounded annual growth rate over the last five years, higher than its 5.8% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into ABM’s earnings to better understand the drivers of its performance. A five-year view shows that ABM has repurchased its stock, shrinking its share count by 6%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q1, ABM reported EPS at $0.86, down from $0.87 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects ABM’s full-year EPS of $3.57 to grow 8.3%.

Key Takeaways from ABM’s Q1 Results

We enjoyed seeing ABM beat analysts’ organic revenue expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. On the other hand, its full-year EPS guidance slightly missed. Still, this print had some key positives. The stock remained flat at $51 immediately after reporting.

So do we think ABM is an attractive buy at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.