ABM Industries Incorporated ABM has started a series of energy-saving initiatives for Connellsville Area School District in Fayette County, PA, to save more than $26.4 million in energy and operating costs over a 15-year period. The comprehensive energy performance contracting program through ABM’s Technical Solutions group is likely to be completed by October 2018.
In order to reduce energy costs, ABM is implementing several energy-efficient infrastructure upgrades to various buildings in the region such as rejuvenated HVAC (heating, ventilation and air conditioning) systems and maintenance, lighting upgrades to efficient LED lighting systems, water conservation upgrades and new energy management systems. Some facilities in the county that are likely to get an infrastructure facelift include four elementary schools and high schools like Connellsville Area High School, Connellsville Area Middle School, and the Connellsville Area Career and Technology Center.
ABM’s energy performance contracting program aims to replace or upgrade the aging infrastructure facilities without incurring upfront costs. This is primarily achieved through the reallocation of current and future owning and operating costs while maximizing energy efficiency and lowering overall annual costs. The program is designed according to clients’ technical facility needs and sustainability goals. It seeks to eliminate redundant costs in a client’s operating budget, allowing savings to fund the upgrades.
The company has embarked on a Vision 2020 Plan that outlines its vision for the next five years and hinges on three primary phases, the first of which is aimed to increase 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 is currently focusing on the second phase and remains confident of achieving $40-$50 million in savings through operational efficiencies by the end of 2017. These systematic and strategic plans of action are likely to help the company fuel its growth momentum.
However, ABM has underperformed the industry with an average year-to-date decline of 2% as against a gain of 17% for the latter. ABM has a significant presence in the U.K. and as the European economy is highly unpredictable post the Brexit referendum, it becomes difficult for it to increase revenues and reduce costs. The company is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering the productivity of the company. Strong competitive pressure could also limit the company’s success rate in bidding for profitable businesses and its ability to increase prices in accordance with the rising costs.
ABM currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry are DCC plc DCCPF, SPS Commerce, Inc. SPSC and SGS SA SGSOY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DCC has a long-term earnings growth expectation of 16%.
SPS Commerce has a long-term earnings growth expectation of 25%. It has beaten earnings estimates in each of the trailing four quarters with a positive average surprise of 18.8%.
SGS SA has a long-term earnings growth expectation of 6%.
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