ABM Industries' Shares Got Crushed: What You Need to Know
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: An earnings beat isn't often the kind of catalyst that starts an 11% sell-off in a stock -- but that's precisely what shareholders of ABM Industries (NYS: ABM) got today, one day after the facility-services provider reported earning $0.51 per share for its fiscal third quarter of 2011, $0.04 ahead of estimates.)
So what: Earnings were up 21% in comparison with last year's Q3 -- not quite up to par with 24% revenue guidance. Revenues also fell a whisker short of the Wall Street consensus.
Now what: ABM predicts that it will close out this fiscal year with about $1.28 per share in GAAP earnings. At today's closing price, this works out to a current-year P/E of 14.8. That seems a bit high for a stock that most analysts expect to grow slower than 10% per year over the next five years and that just finished undershooting estimates on the top line. And although the company's 2.8% dividend yield is nice, it's not quite enough to justify the price.
I wouldn't short the stock, but yesterday's earning beat wasn't enough to make me go long, either.
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At the time this article was published Fool contributorRich Smithdoes not own (or short) shares of any company named above. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.
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