Why Shares of ABM Industries, Inc. Jumped 13% Today

What happened

Shares of ABM Industries, Inc. (NYSE: ABM) jumped as much as 13.4% in trading Thursday after the facility solutions provider reported fiscal second-quarter results that topped analyst expectations. The stock cooled off slightly at midday but was still up 11.3% at 11:05 a.m. EDT.

So what

Quarterly revenue jumped 20.6% to $1.58 billion and net income fell 14.9% to $26.6 million, or $0.40 per share. Adjusted net income from continuing operations, which is what analysts try to estimate, dipped 4.1% to $0.47 per share, which came in ahead of the $0.43 analysts were looking for, according to Yahoo! Finance. Sometimes beating low expectations can drive a stock higher, even if there isn’t any bottom-line growth.

Image source: Getty Images.

Management also said that full-year adjusted earnings from continuing operations would be $1.85 to $1.95 per share, which was in line with the $1.94 analyst estimate.

Now what

Sometimes beating low expectations is what pushes a stock higher and that’s what happening with ABM Industries today. Shares had fallen 22.4% in 2018 prior to the earnings release and clearly investors had been lowering expectations all year.

While shares are up big today, they could fall back to earth if the rest of 2018 doesn’t live up to newly heightened expectations. In particular, I’m worried that full-year earnings guidance is at the very high end of what analysts expect, and if results come up short, the stock could pull back again.

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Travis Hoium owns shares of Verizon Communications. The Motley Fool owns shares of Verizon Communications. The Motley Fool has a disclosure policy.

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