ABM Industries (ABM -9%) began the new fiscal year positively with impressive Q1 results. The company achieved its largest EPS beat since last year's Q1. Revenue increased by 2.2% year-over-year to $2.11 billion, slightly exceeding expectations. ABM also adjusted its FY25 EPS guidance upward to $3.65-3.80 from $3.60-3.80, despite facing macroeconomic challenges.
As a leading provider of facility services, including janitorial, engineering, parking, electrical, HVAC, and landscaping, ABM is a key indicator of the industrial economy. The company has navigated macroeconomic turbulence due to remote work and slowing manufacturing.
ABM expressed satisfaction with its Q1 performance, highlighting continued strength in technical solutions and aviation, stability in education, and challenges in business and industry (B&I). The company is optimistic that commercial real estate will support B&I growth in 2025, while other markets remain strong.
For the B&I segment, a recent CBRE report indicated a 24% increase in leasing activity for high-quality commercial office buildings in Q4 compared to Q3. ABM anticipates increased office attendance, leading to higher work order volume and expects B&I growth in the latter half of FY25.
ABM's manufacturing and distribution (M&D) segment is stable, benefiting from a robust US industrial economy and growth in semiconductor and data center markets. The company has secured new business, including a major eCommerce client, and expects mid-single-digit organic growth in 2H25 as new deals commence in May.
The company is enthusiastic about its ERP implementation. After transitioning its education segment to a cloud-based system last year, ABM applied these insights to B&I and M&D in Q1. The new ERP system is expected to enhance cost efficiencies, synergy capture, and provide real-time analytics for growth opportunities.
Overall, ABM delivered a solid quarter. Although the stock initially rose post-results, it later pulled back. ABM has faced macro pressures, with remote work impacting its B&I segment, which is now showing signs of recovery. The M&D segment is gaining from new data centers, and the aviation sector has rebounded. Investors may have anticipated full-year EPS guidance following the Q1 upside.
