Baird Upgrades ABM Industries On Resilient Recurring Revenue Model

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Baird analyst Andrew Wittmann upgraded facility management company ABM Industries (NYSE:ABM) to Outperform with a price target of $50 on Tuesday,

The analyst said in a note to clients that they recently hosted non-deal management meetings.

“At 9.3x our F2023 EPS estimate and with a defensive/recurring revenue model which showed resiliency in both the 2009 and COVID downturns, we believe the risk/reward has improved and that investors will be increasingly attracted to this model,” said Wittman. “Undoubtedly, ABM’s become a better company, with further opportunity remaining. The labor market has eased, this likely continues. While F2025 management targets still screen as a stretch, we’re not sure that matters in this market where defense is increasingly valued.”

The analyst added that ABM’s defensive/value characteristics will draw increased interest from investors.

Wittman Continued: “In 2009, organic revenues declined ~6% peak-to-trough (margins expanded slightly). We see 2009 as today’s best proxy, though ABM’s core COVID performance also held up well. The combination of a highly-recurring/annuity model and an intensely variable cost structure (essentially all labor) combine to offer this advantage.”

ABM Industries shares closed Tuesday’s session up 5.5%.

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