ABM Industries Incorporated ABM reported mixed second-quarter fiscal 2026 results. Earnings per share (EPS) missed the Zacks Consensus Estimate, while revenues beat the same.
Despite the lower-than-expected earnings results, the stock rallied 10.9% following the earnings release on June 5.
ABM posted adjusted earnings of 90 cents per share in the second quarter of fiscal 2026, up 4.7% from the year-ago period but missing the Zacks Consensus Estimate of 92 cents by 2.2%.
Quarterly revenues rose 8.4% year over year to $2.29 billion and beat the consensus mark of $2.22 billion by 2.9%. Performance was supported by record first-half sales bookings, with strength led by Technical Solutions and Aviation.
ABM Industries Incorporated Price, Consensus and EPS Surprise
ABM Industries Incorporated price-consensus-eps-surprise-chart | ABM Industries Incorporated Quote
ABM Shows Solid Top-Line Momentum Despite Exits
ABM Industries delivered organic revenue growth of 6.1% in the quarter, with acquisitions adding 2.3% to reported growth. Management pointed to healthy demand across several end markets, including energy infrastructure, semiconductors and airport modernization, alongside steady recurring work that supports the company’s baseline revenue profile.
Business & Industry was flat organically, pressured by the exit of a large U.K. client during the quarter and additional customer exits, particularly on the West Coast. Management framed some of the exits as intentional, citing a focus on walking away from accounts that do not meet profitability thresholds.
ABM Industries Leans on ATS & Aviation for Growth
By segment, Technical Solutions revenues climbed 27.2% year over year to $267.3 million, supported by data center activity, battery energy storage systems and contributions from recent acquisitions. Aviation revenues increased 19.5% to $310.8 million, reflecting healthy travel demand and the increase in the latest wins, including the London Heathrow contract.
Manufacturing & Distribution revenues rose 16.5% to $463.8 million, aided by client expansions and the WGNSTAR acquisition, while Education revenues improved 1.9% to $232.2 million on price escalations. Business & Industry revenues were essentially unchanged at $1.02 billion, as strength in U.K. operations was largely offset by client exits.
ABM Sees Mixed Profitability as Mix Shifts
Adjusted EBITDA improved to $131.7 million from $125.9 million a year ago, reflecting higher volume and improved execution in parts of the business. Still, the segmental operating margin declined to 7.3% from 7.9% last year, as newer contracts in Manufacturing & Distribution and Business & Industry weighed on profitability, and Aviation absorbed inefficiencies tied to weather-related costs and contract dynamics.
Within Technical Solutions, operating profit increased year over year, but the margin held near the prior-year level as the quarter skewed toward equipment-intensive infrastructure work. Management emphasized that project mix mattered, noting that a heavier “turning the wrenches” phase can carry lower margins than design-and-engineering work, with mix expected to improve later in the year.
ABM Industries Offsets Headwinds With Operating Focus
On a GAAP basis, net income rose to $43.1 million, or 73 cents per diluted share, from $42.2 million, or 67 cents per share, in the prior-year quarter. The company cited lower tax expenses and reduced corporate costs as positives, partially offset by higher interest expenses and amortization tied to the WGNSTAR acquisition.
In Aviation, profit was pressured by incremental weather-related costs, TSA-driven disruptions and ramp-up costs associated with Heathrow. In Business & Industry, the margin declined year over year due to contract mix shifts and increased sales investments, though management expects the margin to benefit in the back half as the impact of exited, lower-return work flows through.
ABM Highlights Cash Improvement & Deleveraging Path
Cash generation improved versus last year, with the operating cash flow of $66.2 million and a free cash flow of $22.4 million in the quarter. Management credited working-capital discipline and continued progress on enterprise resource planning implementation for the year-over-year improvement.
ABM ended the quarter with total indebtedness of $1.9 billion and available liquidity of $613.8 million, including $94.9 million in cash and equivalents. Leverage stood at 3.2X, and management reiterated an expectation to bring leverage below 3X by the end of the fiscal year, positioning debt repayment as the near-term capital allocation priority.
ABM Industries Reaffirms Outlook as Growth Skews to Back Half
ABM maintained its adjusted earnings outlook for fiscal 2026 at $3.85-$4.15. The midpoint ($4) of the guided range is higher than the consensus estimate for earnings of $3.94.
The company projects organic revenue growth at the higher end of 3-4%, with total revenue growth toward the high end of 4-5%, including acquisition contributions.
Management expects margin expansion to be weighted to the second half, driven by improved volume and service mix in Technical Solutions and continued price escalation and cost actions. ABM also updated its guidance approach to include the impacts of prior-year self-insurance adjustments and forecast interest expenses of $110 million, with a normalized tax rate of 29-30%.
ABM carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings Snapshot
Republic Services, Inc. RSG delivered solid first-quarter 2026 results, with EPS of $1.70 beating the Zacks Consensus Estimate of $1.64 by 3.7%. Earnings increased 7.6% from $1.58 in the year-ago quarter.
Revenues rose 2.6% year over year to $4.11 billion and marginally surpassed the consensus mark of $4.10 billion.
Corpay, Inc. CPAY delivered a strong first-quarter 2026, with adjusted earnings of $5.80 per share, rising 28.6% year over year and surpassing the Zacks Consensus Estimate by 5.5%. Revenues of $1.26 billion increased 25.4% year over year and beat estimates by 4.4%.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Republic Services, Inc. (RSG): Free Stock Analysis Report
ABM Industries Incorporated (ABM): Free Stock Analysis Report
Corpay, Inc. (CPAY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).