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ABM Industries (ABM -9%) has gotten the new fiscal year off to a good start with upside Q1 (Jan) results. It reported its largest EPS beat since Q1 of last year. Revenue rose a modest 2.2% yr/yr to $2.11 bln, but that was slightly better than expected. ABM also raised the bottom end of its FY25 adjusted EPS guidance to $3.65-3.80 from $3.60-3.80, not a huge amount but it could have been worse given the macro headwinds.

• As a major provider of facility services (primarily janitorial and engineering but also parking, electrical, HVAC, landscaping), we like to keep an eye on ABM as a gauge on the industrial economy. ABM has been navigating through some macro turbulence over the last couple of years with remote work and slowing manufacturing.
• ABM said it was pleased with how it performed in Q1. Results reflected a continuation of the same trends it saw in 2H24 with strong momentum in technical solutions and aviation (airport ops), stability in education, and some lingering challenges in business and industry (B&I). ABM was also confident that commercial real estate will allow its B&I segment to return to growth in 2025 while its other end markets continue to remain constructive.
• ABM provided some good color on the outlook for each segment. In B&I, a recent CBRE report showed that leasing activity for high quality commercial office buildings in the US increased 24% in Q4 vs Q3. Also, ABM is seeing employers push for greater office attendance, which should drive more work order volume for ABM. The company feels confident that B&I will return to growth in the latter half of FY25.
• ABM said that its M&D (manufacturing & distribution) segment remains on solid ground thanks to a strong US industrial economy and continued growth in the semiconductor and data center markets. ABM continues to win new business, including new work for a major eCommerce company. ABM continues to expect mid-single digit organic growth in 2H25 for M&D as these new deals take effect in May.
• The company is excited about its ERP implementation. Last year, its education segment fully transitioned to its new cloud-based system. ABM took those learnings and applied them as it rolled out the system to B&I and M&D at the start of Q1. Once fully implemented, ABM expects this new ERP system will drive cost efficiencies, improve synergy capture and provide real time analytics to uncover commercial growth opportunities.

Overall, this was a solid but not spectacular quarter. The stock initially traded higher following results, but pulled back during the call. We have followed ABM for a long time and it has been hurt by macro pressures. Remote work has hurt its B&I segment, but that sounds like it's finally starting to recover. Its M&D segment had struggled, but is now benefitting from new data centers and Aviation has bounced back nicely. Perhaps investors wanted to see a full year EPS guidance given the upside in Q1.