Dividend King ABM Industries (ABM 9.93%) wasn't looking so regal on Thursday. Following two bearish post-earnings analyst moves, investors aggressively sold the stock, resulting in a nearly 10% decline in value.
Fourth-quarter flop
Baird's Andrew Wittmann downgraded his recommendation on ABM. He now feels the industrial services company is a neutral, rather than a buy. He also reduced his price target to $51 per share from $55.
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Compounding that, his peer Joshua Chan from UBS sliced his fair value assessment, trimming it from $54 per share to $52. However, he maintained his neutral recommendation.
Neither adjustment should have come as a surprise to the market. Wednesday morning, ABM published its fourth quarter of fiscal 2025 results, and they weren't particularly encouraging.
This, despite the company setting a new record for revenue of $2.3 billion, an increase of more than 5% year-over-year. Net income not in accordance with generally accepted accounting principles (GAAP) came in at just under $55 million ($0.88 per share), down slightly from the year-ago quarter.
With those numbers, ABM slightly exceeded the consensus analyst estimate of $2.28 billion. However, it whiffed badly on the bottom line, as those pundits were collectively modeling a non-GAAP (adjusted) net profit of $1.09.
Management also proffered guidance for the entirely of its new fiscal year. It believes its revenue growth will range from 3% to 4% over the 2025 result, and adjusted net income is expected to be between $3.85 and $4.15, representing an improvement over the $3.44 of fiscal 2025.
NYSE: ABM
Key Data Points
Over-reaction
While that gap between expected and actual earnings is wide, I feel investors are punishing ABM unnecessarily. The company remains habitually profitable, and at this stage in its existence, it isn't easy to achieve revenue growth.
On top of that, as a Dividend King (i.e., a company that has declared dividend raises at least once annually for a minimum of 50 years running), its quarterly dividend is always on the rise, to the point where it yields a respectable 2.4%. I'd consider this dip in the share price to be a bargain-buying opportunity, then.
