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ABM Industries (ABM +13%), a provider of facility services, including janitorial, parking, HVAC, and landscaping, is scooping up phenomenal gains today, gapping to one-year highs following better-than-feared Q4 (Oct) results. Ahead of ABM's report, the market was cautious, evidenced by shares remaining relatively flat on the year. A depressed commercial property market as the hybrid work model remains prevalent has led to intense headwinds for ABM. The company was coming off its first earnings miss in over two years last quarter, contributing to its slashed FY23 EPS guidance. ABM also initiated adjustments to its cost structure in Q3 (Jul) to better steer through a challenging demand environment, which it predicted would remain soft throughout 2024.

Therefore, by returning to delivering earnings upside in Q4 as well as projecting FY24 EPS of $3.20-3.40, consistent with analyst forecasts, ABM is rapidly alleviating previously elevated concerns. The company also announced an additional $150 mln for share buybacks.

• During Q4, ABM grew revs by 4.4% yr/yr to $2.1 bln, providing a decent lift to its bottom line, which expanded by 13.5% to $1.01. While growth was broad-based, it was not evenly distributed.
• Business & Industry, ABM's largest segment by far at 50% of total revs, grew sales at the slowest pace at 0.4% yr/yr to $1.03 bln. Management commented that office density rates remained somewhat static during the quarter, with commercial office vacancies near 20%. These factors directly hurt demand for the company's janitorial services. However, even though hybrid work looks to be the new norm following the pandemic, ABM anticipates a gradual increase in employees' time at the office over the next couple of years. 
• Each of ABM's other segments enjoyed solid growth in Q4. Manufacturing & Distribution experienced a 5.4% bump to $391.2 mln, benefiting from e-commerce and logistics clients, while onshoring of manufacturing continued to provide a tailwind. Education expanded by 5.8% to $229.8 mln driven by 100% in-class learning. Technical Solutions grew by 6.2% to $190.8 mln comprised of an even split between the closeout of several legacy projects and M&A activity.
• A notable standout was Aviation, which soared by nearly 16% to $248.2 mln, reflecting sustained strength within the leisure and business travel markets, including international travel. ABM does not anticipate Aviation to let up on the gas in 2024 either, projecting another solid year ahead despite lapping more formidable yr/yr comparisons.
• Speaking of which, ABM expects decent growth across all its segments outside of Business & Industry, which may remain muted due to 2024 office lease expirations which could shift clients toward smaller office footprints.

It has been a tricky year for ABM as remote work has weighed on its most critical businesses. However, even though 2024 is not shaping up to be a quick bounce to pre-pandemic activity, at least not within its Business & Industry division, it looks like a solid growth year for ABM, providing plenty of room for continued upside.