Beating Buffett

ABM Industries [NYSE:ABM  $20.30 /share] is the largest contractual facilities servicer in America for industrial and commercial properties. About 5% of total revenues come from Canadian operations. The company provides janitorial services (including floor cleaning and finishing, wall and window washing, and other cleaning services) parking, engineering, and security to hundreds of properties throughout North America. They also market janitorial supplies and equipment.

The type of services ABM provides are not particularly economically sensitive nor are they readily deferrable. This has shown to be true over many years. Fiscal 2009 (ended Oct. 31, 2009) marked the fourteenth year of the past sixteen that saw higher year-over-year EPS.

Earnings, cash flow, book value and dividends each hit all-time highs in the FY just completed. Here are ABM’s per share numbers from continuing operations as reported by Value Line:

Consensus views for FY 2010 and 2011 are now at $1.42 and $1.59 /share. At this afternoon’s price of $20.30 that puts the multiple at just 14.3x this year’s and about 12.8x next year’s expectations. Those are bargain levels compared to all of ABM’s trading history prior to the late 2008 – early 2009 market meltdown. Value Line notes ABM’s 10-year median P/E has been 19x and is using that same multiple in calculating their 3-5 year projections.

The current yield of 2.75% is also attractive in today’s interest rate environment and it’s higher than typical for ABM while well covered at about 39% of net earnings. The dividend has been increased in each of the past 15 years. It now stands at $0.14 /share quarterly.

Total debt is < 20% of capital. They have no defined benefit plan (and no pension liabilities). Value Line rates their ‘earnings predictability’ in the 90^th percentile (with 100^th being best) and sees ‘stock price stability’ in the 75^th percentile.

Officers and directors have shown confidence through their ownership of about 12.7% of the outstanding shares. As the leader in its field ABM is well positioned to gain market share. They picked up a long-term contract to maintain the Staples Center (home of the LA Lakers) last year.

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ABM Industries Incorporated (ABM) is the largest publically traded facility services contractor in the United States. ABM and its subsidiaries provide janitorial, parking, security and engineering services for commercial, industrial, institutional and retail facilities in cities throughout the United States. About 5% of revenues come from Canadian operations. The Company operates through four segments: Janitorial, Parking, Security and Engineering.

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ABM Industries: (NYSE:ABM) Jun. 10, 2009 $18.65
52-week range: $11.64 (Feb. 20, 2009) - $27.47 (Sep. 3, 2008)
Dividend = $0.13 quarterly = 2.79% current yield

Company profile by Morningstar :

ABM Industries offers contractual facilities services for industrial and commercial properties. The company provides janitorial services (including floor cleaning and finishing, wall and window washing, and other cleaning services) parking, engineering, and security to hundreds of properties throughout North America. ABM Industries also markets janitorial supplies and equipment.

This company is the largest publicly traded facilities contractor in America. Fiscal 2009 (ends Oct. 31, 2009) will likely mark the fourteenth year of improved year-over-year earnings of the past sixteen. The dividend has been increased in each of the past 15 years.

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