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Zacks Industry Outlook Highlights: Limbach Holdings, Inc., ABM Industries Inc. and Rollins, Inc

For Immediate Release

Chicago, IL – January 13, 2022 – Today, Zacks Equity Research discusses Limbach Holdings, Inc. LMB, ABM Industries Inc. ABM and Rollins, Inc. ROL.

Industry: Building Maintenance

Link: https://www.zacks.com/commentary/1850769/3-stocks-to-gain-from-the-flourishing-building-maintenance-industry

Strength in the construction business, along with a rise in manufacturing and service activities, is enabling the Zacks Building Products - Maintenance Services industry to support the improving demand environment.

Service essentiality, technology and capital-management measures are aiding Limbach Holdings, Inc., ABM Industries Inc. and Rollins, Inc. to sail through the pandemic-induced testing times.

About the Industry

Companies under the Zacks Building Products - Maintenance Services category provide a wide range of services, including electrical, lighting, cleaning, installation, repair, replacement, heating, ventilation, air-conditioning (HVAC), plumbing, landscaping, equipment upgradation, energy monitoring and pest control. The industry is steadily recovering from the pandemic-induced weakness, with demand for services shooting up in residential, commercial and public buildings and various industries across the globe.

As these services are essential and cannot be delayed or canceled, demand for the same is expected to accelerate drastically post-pandemic, helping the industry players quickly cater to the end markets, recover from the Covid-19-induced supply-chain disruptions and negative financial impacts.

What's Shaping the Future of the Building Maintenance Industry?

Sustained Demand Expansion: Revenues, income and cash flows have been increasing for the past several years, mainly because the companies offer services that consumers generally cannot delay. This has enabled most industry players to increase dividends.

Manufacturing and Service in the Pink: With both manufacturing and service activities gathering steam, demand for building maintenance services is anticipated to rise steadily. Although the economic activity in the manufacturing sector shrunk 2.4% from November to December, with the Manufacturing PMI measured by the Institute for Supply Management (“ISM”) touching 58.7%, the reading of above 50% marked the 19th consecutive month of expansion.

Non-manufacturing activities declined 7.1% in December from the November all-time high of 69.1, as the Services PMI measured by the ISM touched 62%. With a reading above 50%, this is the 19th consecutive month of expansion of service activities.

Increasing Construction Spending: The construction business, on which the industry is largely dependent, has strengthened sequentially and year over year. Per the latest release by the U.S. Census Bureau, construction spending during November 2021 was estimated at a seasonally-adjusted annual rate of $1,625.9 billion, up 0.4% from the October 2021 estimate and 9.3% from the November 2020 estimate. During the first 11 months of 2021, construction spending rose 7.9% from the same period in 2020.

Zacks Industry Rank Indicates Bright Prospects

The Building Products - Maintenance Service industry, which is housed within the broader Business Services sector, currently carries a Zacks Industry Rank #18. This rank places it in the top 7% of more than 250 Zacks industries.

The group’s Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates solid near-term growth prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Analysts covering the companies in this industry have been steadily pushing their estimates north. Over the past year, the industry’s consensus earnings estimate for 2022 has moved 20.2% north.

Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and current valuation.

Industry's Price Performance

Over the past year, the Zacks Building Products - Maintenance Service has depreciated 17.6% against the S&P 500 composite’s rally of 23.7%. The broader sector has declined 37.5% during the same period.

Industry's Current Valuation

Comparing the industry with the S&P 500 composite on the basis of forward 12-month price-to-earnings (P/E), which is a commonly-used multiple for the industry, we see that the industry trades at 30.73X, higher than the S&P 500’s 21.52X and the sector’s 29.65X.

Over the past five years, the industry has traded as high as 72.32X, as low as 25.11X and at a median of 37.44X.

3 Building Maintenance Stocks to Consider

We present three stocks that currently carry a Zacks Rank #1 (Strong Buy) or a Zacks Rank #3 (Hold) and are well-positioned for near-term growth. You can see the complete list of today’s Zacks #1 Rank stocks here.

Limbach Holdings, Inc.: The company is a commercial specialty contract services provider. It is currently focusing on risk management under an enhanced project selection framework, cash flow and liquidity maximization through improved working capital management. While the sales pipeline is strong in most of its existing markets, Limbach pursues opportunities in new markets.

Limbach currently sports a Zacks Rank #1. The Zacks Consensus Estimate for the company’s 2022 EPS has moved up 8% over the past 60 days.

ABM Industries Inc.: This integrated facility solutions provider currently carries a Zacks Rank of 3. ABM's multi-year comprehensive strategic plan, ELEVATE, focuses on providing clients with offerings that enhance transparency and efficiencies, developing its own talent management system capabilities, expanding data usage and modernizing the digital ecosystem. ELEVATE is expected to significantly accelerate the company’s organic growth, improve its strategic and comprehensive positioning and reinforce profitability.

The recently closed acquisition of Able Services is expected to strengthen ABM’s engineering and technical services and expand its sustainability and energy efficiency offerings. The buyout adds $1.1 billion in engineering and janitorial services revenues and is anticipated to achieve around $30 million to $40 million in cost synergies for the company.

The Zacks Consensus Estimate for fiscal 2022 EPS has been unchanged at $3.41 over the past 60 days.

Rollins, Inc.: This leading pest and termite control services provider is benefiting from its balanced approach to organic and inorganic growth. The company’s revenues increased 11.4% in the third quarter of 2021, with acquisitions contributing 2.2% and organic growth contributing 9.2%. All of its business lines – residential, commercial and termite – are currently in good shape.

Rollins currently carries a Zacks Rank #3. The Zacks Consensus Estimate for 2022 EPS has been unchanged at 72 cents over the past 60 days.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.


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ABM Industries Incorporated (ABM): Free Stock Analysis Report
 
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