ABM Industries (ABM) Hits New 52-Week High On Core Focus

Shares of leading provider of facility solutions, ABM Industries Inc. (NYSE:ABM) scaled a new 52-week high of $38.12 on Aug 15 for a solid year-to-date return of 33.9%. Barring minor hiccups, ABM’s share price has steadily been on an uptrend since the beginning of this year.

Despite its strong price appreciation, this Zacks Rank #3 (Hold) stock has the wherewithal to continue its growth curve. The stock is currently trading at a forward P/E of 23.5x and has long-term earnings growth expectation of 8%.

Growth Drivers

Over the years, ABM has developed a platform to deliver an end-to-end service model to its clients by realigning its operational structure into an on-site, mobile and on-demand market based structure. This realignment has improved its long-term growth prospects and provides higher margin opportunities by enabling it to better deliver end-to-end services to its clients across urban, suburban and rural areas. The company further expects to extend its global footprint and strengthen its position in the existing markets through both inorganic and organic growth across the industry verticals.

In order to fuel its growth momentum, ABM has embarked on a Vision 2020 Plan that outlines its vision for the next five years. The plan has three primary phases, the first is aimed at increasing the efficiency of the company through diligent execution of the operating plan and stringent cost-reduction activities. The second phase will focus on driving growth across the realigned verticals through effective realization of the cost savings from procurement, account management and other organizational changes. The final phase of the transformation will include accelerated growth impetus from the vertical alignment and account planning systems with a continuous focus on additional cost savings.

ABM has successfully completed the first phase of the Vision 2020 plan. The company is currently focusing on the second phase of the plan and remains confident of achieving $40–$50 million in savings through operational efficiencies by the end of 2017.

ABM’s comprehensive and transformative initiatives are focused on driving sustainable profitability by effectively allocating resources to high-margin services and business verticals with a strong competitive edge. Management also disclosed that corporate restructuring initiatives are well on track to yield sustained long-term growth momentum. The company’s recent inclusion in the Fortune 500 list further increases its goodwill in the industry and augments its position in the market.

All these measures for a relatively healthy growth impetus for the near future probably raised investor confidence and drove the shares to a 52-week high.

Other Stocks to Consider

Some better-ranked stocks in the industry include Illinois Tool Works Inc. (NYSE:ITW) , Rollins Inc. (NYSE:ROL) and Metso Corporation (OTC:MXCYY) , each carrying a Zacks Rank #2 (Buy).