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
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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