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Healthcare Services Group, Inc. (HCSG) – ABM Industries, Inc. (ABM): To Buy or Not To Buy?

Long before outsourcing became a key component of business, many organizations fougnd it economical to contract out their janitorial services. ABM Industries, Inc. (NYSE:ABM) started as a simple window-washing service for San Francisco businesses back in 1909. Today, ABM Industries, Inc. (NYSE:ABM) has more than 350 offices scattered around the world with more than 100,000 employees and annual revenues in excess of $4 billion

ABM Industries, Inc. (NYSE:ABM)

In this article, we will consider where ABM Industries, Inc. (NYSE:ABM) actually stands compared to its competitors, to help you see its possible potential and the risks it may face in the future.

Business updates 

Regardless of current business conditions, buildings must be protected, cleaned, heated and cooled. Thus, ABM Industries, Inc. (NYSE:ABM)’s business model provides a stable investing opportunity for conservative investors.

ABM Industries, Inc. (NYSE:ABM) has paid dividends to its shareholders for an impressive 189 consecutive quarters , raising its dividend every year over the past 10 years. ABM shares have increased by about 30% year to date, and close to 37% year over year.

On June 3, 2013 the company released solid financial results for Q2, showing an 11% increase in revenue and a 20% rise in EPS. ABM Industries raised its guidance for the full year 2013  from its earlier expectation of earnings in line with analyst estimates.

Over the course of its history, the company has expanded through acquisition to achieve organic growth in a stable industry. In November of 2012, ABM Industries added a Washington, D.C.-based provider of mechanical and energy efficient solutions, Calvert-Jones, and has more recently announced key service offering expansions in operations at London’s Heathrow airport and for the US Navy. ABM Industries’ Healthcare division was awarded a long-term contract with Florida’s Memorial Healthcare Systems, the second-largest public health care provider in the US.

While December of 2010 could hardly be considered recent, some investment firms have lately pointed to the ill-fated acquisition of The Linc Group as a major factor contributing to ABM Industries’ substandard financial performance in FY 2011 and 2012. The Linc Group provided barracks services for US troops in Iraq. As the troop withdrawal accelerated in 2011, the company suffered, and so did ABM.

ABM Industries, Inc. (NYSE:ABM) vs. the competition

In truth, ABM Industries has no direct publicly traded competitor in the US. Its primary competition comes from smaller regional and local privately owned companies. The company has a history of spotting promising competitors, then acquiring them.

The Linc Group acquisition may have backfired, but other acquisitions — like that of Air Serv, a service provider to airports, and HHA, a provider of food and facility management services to the health care sector — have expanded ABM’s reach.

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