ABM Industries Incorporated (NYSE: ABM) reported third-quarter fiscal 2026 results that exceeded Wall Street expectations, with adjusted earnings per share rising 27% year over year to $1.04. The facility services company topped the consensus estimate of $1.01.

Revenue increased 4.2% to $2.317 billion, surpassing the $2.310 billion forecast. Organic growth contributed 2.1%, while acquisitions added another 2.1%. Adjusted EBITDA climbed 11% to $139.6 million. Segment operating margin improved 40 basis points sequentially to 7.7%. Shares gained 0.2% to trade at $50.65 on Wednesday.

Financial Performance and Balance Sheet

Operating cash flow totaled $146.8 million, while free cash flow reached $128.4 million. ABM ended the quarter with $1.8 billion in debt. Its debt-to-pro forma adjusted EBITDA ratio fell to 2.9x, reaching the company’s below-3x leverage target one quarter early.

Segment Highlights

Aviation revenue rose 12% to $328.1 million. Manufacturing and Distribution revenue jumped 18% to $481 million, including 8% organic growth and a 10% contribution from WGNSTAR. Education revenue edged higher to $235.8 million. Operating profit in this segment rose 9% to $23 million, while margin expanded 70 basis points to 9.7%.

Technical Solutions revenue increased 4% to $259.9 million. However, Business & Industry revenue fell 2.6%, mainly due to client exits.

Data Center and Emerging Growth

ABM’s semiconductor, microgrid and data-center businesses generated nearly $775 million in revenue through the first nine months. Revenue grew 26% organically and about 40% including WGNSTAR. Those businesses accounted for more than 11% of total revenue and generated a double-digit blended operating margin. Semiconductor revenue surged 65% organically.

Meanwhile, ABM’s microgrid business has grown roughly fourfold since 2022. Organic revenue increased 17% during the first nine months of fiscal 2026. Management highlighted its growing exposure to data centers, where its pipeline is now a multiple of where it stood a year ago.

Outlook and Guidance

Management said the current 8% organic growth rate does not reflect the opportunity it sees over the next two to three years and expects “very, very healthy” double-digit growth in the business over time. ABM narrowed its fiscal 2026 adjusted EPS guidance to $3.95-$4.10 from $3.85-$4.15. The analyst estimate is $3.98.

Management expects Technical Solutions to rebound in the fourth quarter. It also expects Business & Industry to return to organic growth around the middle of fiscal 2027. ABM expects to execute an approximately $20 million microgrid contract for the U.S. Army Corps of Engineers in calendar 2027. Data-center revenue grew 8% organically year to date.

Analyst Ratings and Price Targets

Several analysts have recently adjusted their views on the stock following the earnings announcement. Below are the most recent rating changes and price target adjustments from tracked analysts:

Freedom Capital Markets analyst David Silver maintained the stock with a Buy rating and raised the price target from $55 to $58. Baird analyst Andrew Wittmann maintained the stock with a Neutral rating and raised the price target from $48 to $53. Conversely, UBS and Truist Securities both cut their targets to $45 in March, maintaining Neutral and Hold ratings respectively.

What the Numbers Show

The acceleration in high-margin technical segments is reshaping ABM’s profile. While traditional facility services like Business & Industry faced headwinds with a 2.6% revenue decline, the semiconductor and data center units delivered 65% and 8% organic growth respectively. This divergence suggests that the company’s strategic pivot toward critical infrastructure services is beginning to offset softness in legacy verticals, supporting the expansion in segment operating margins despite mixed top-line performance across all divisions.

Baird analyst Andrew Wittmann has maintained a Neutral rating on ABM Indus while raising the price target to $48 from the previous $45. The revised target indicates a reassessment of the company's valuation potential on the NYSE.

Rating and Price Target Adjustment

The research update keeps the stock's rating at Neutral, suggesting that the risk-reward profile remains balanced. The increase in the price target to $48 signals a modestly improved outlook for the shares.