From Yahoo Finance · · 1m 50s
ABM's cash flow snapped back, but the business split in two
Free cash flow jumped $157 million and guidance went up, yet the market is still pricing ABM like nothing changed.
In brief
Free cash flow jumped $157 million and guidance went up, yet the market is still pricing ABM like nothing changed. ABM fixed its cash generation and found real growth in semiconductor and data center work, but two segments are shrinking and the market wants another quarter of proof before it pays up. Originally…
Cash flow came roaring back
Nine-month free cash flow hit $199.6 million, up from $42.4 million a year earlier. Management credited tighter working capital and a finally stable ERP rollout after a disruptive year.
Guidance went up across the board
ABM raised full-year reported free cash flow to $210 million and normalized to $285 million. Adjusted EPS rose 27% to $1.04, and leverage dropped below 3 times a full quarter early.
The new businesses are compounding
Semiconductor, microgrid, and data center work brought in nearly $775 million over nine months, more than 11% of total revenue. Semiconductor organic growth alone ran 65%.
“inside the bull's eye”
Two segments are dragging
Business and Industry revenue fell 2.6% after a big UK client left and Northern California offices stayed soft. Aviation grew 12% but its margin slipped to 5.6% as fuel-squeezed airlines pushed back on pricing.
“competitors are pricing at levels ABM isn't willing to match”
Growth comes with a bill
Technical Solutions rose just 4% on $15 million of client deferrals, and manufacturing margin fell to 8.4%. WGNSTAR added amortization plus $4.2 million in extra interest on acquisition debt.
Wall Street is not convinced
Hedge fund owners fell from 28 to 21, short interest sits at 5.45% of float, and the stock trades at 9.13 times forward earnings. That multiple assumes almost no growth ahead.
Fiscal 2027 is the proof point
Bulls need that semiconductor and data center pipeline to convert into recurring revenue, not one-off projects. Those growth markets are still only 15% to 20% of project-based work.
The essence
ABM fixed its cash generation and found real growth in semiconductor and data center work, but two segments are shrinking and the market wants another quarter of proof before it pays up.
