Hot Stock to Track: ServiceMaster Global Holdings (NYSE: SERV)


On Thursday, Shares of ServiceMaster Global Holdings (NYSE: SERV) showed the bearish trend with a lower momentum of -0.68% to $48.67. The company traded total volume of 295,316 shares as contrast to its average volume of 999.32K shares. The company has a market value of $6.62B and about 135.07M shares outstanding.

ServiceMaster Global Holdings, Inc. (SERV), a leading provider of essential services to residential and commercial customers in the termite, pest control, cleaning and restoration markets, recently declared unaudited fourth-quarter and full-year 2018 results.

For the full year 2018, the company stated a year-over-year revenue increase of 8 percent to $1,900.0M and a net loss of $41.0M, or $0.30 per share. Net loss was negatively influenced by a $249.0M mark-to-market loss on investment in frontdoor, inc. Our post-spin Adjusted EBITDA of $398.0M included $33.0M of costs which were historically allocated to American Home Shield but are not permitted to be classified as suspended operations under U.S. GAAP. Our pre-spin Adjusted EBITDA guidance of between $425 and $435.0M excluded these $33.0M of historically allocated costs. Adjusted net income was $130.0M, or $0.95 per share as compared to $1010M, or $0.74 per share, for the same period in 2017.

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For the fourth quarter, the company stated a year-over-year revenue increase of 12 percent to $457.0M and net loss of $248.0M, or $1.83 per share. Fourth quarter net loss in 2018 was negatively influenced by a $249.0M mark-to-market loss on investment in frontdoor, inc. Adjusted EBITDA was $80.0M, a year-over-year increase of $6.0M and adjusted net income was $26.0M, or $0.19 per share as compared to $10.0M, or $0.07 per share, for the same period in 2017.

Share Repurchase Plan:

On February 19, 2019, the ServiceMaster Board of Directors approved a three-year extension allowing up to $150.0M of repurchases through February 2022. Under the share repurchase program, the company may repurchase shares in accordance with all applicable securities laws and regulations, counting Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The extent to which the company repurchases its shares, and the timing and manner of such repurchases, will depend upon various factors, counting market conditions, regulatory requirements and other corporate considerations, as determined by the company. The repurchase program may be suspended or suspended at any time. The company anticipates funding the purchases from operating cash flow.


Free Cash Flow:

Free cash flow was $187.0M for the year ended December 31, 2018 contrast to $138.0M for the year ended December 31, 2017. Post-spin free cash flow excludes any contributions from the American Home Shield segment, which have been restated as dis-continued operations. The full year 2018 free cash flow to Adjusted EBITDA conversion was 47 percent. The conversion was negatively influenced by Historically Allocated Services and cash interest not permitted to be allocated to suspended operations under U.S. GAAP, as a result of the American Home Shield spin. The company anticipates free cash flow to range between 50 to 60 percent of Adjusted EBITDA in 2019.

Full-Year 2019 Outlook:

The company anticipates full-year 2019 revenue to range from $2,020.0M to $2,050.0M, or a boost of 6 to 8 percent contrast to 2018. Organic revenue growth at Terminix is expected to range from 2 to 3 percent. ServiceMaster Brands will continue to focus on high value business verticals and revenue channels such as commercial restoration, healthcare and commercial cleaning national accounts and is expected to drive organic growth in the mid-single digits.

Full-year 2019 Adjusted EBITDA is anticipated between $435.0M and $445.0M. Terminix is expected to contribute about 30 percent incremental margins, less incremental spin dis-synergies of $11.0M and $9.0M of investments due, in part to, operating duplicate systems during Salesforce implementation. At ServiceMaster Brands, continuing growth in national accounts will increase Adjusted EBITDA but creates slight margin pressure in 2019. We expect a positive inflection point in our year-over-year Adjusted EBITDA margins in the second half of the year as a result of revenue conversion more than offsetting year-over-year dis-synergies and investments in growth.

The Company offered net profit margin of -2.20% while its gross profit margin was 45.20%. ROE was recorded as -2.60% while beta factor was 1.00. The stock, as of recent close, has shown the weekly upbeat performance of 0.29% which was maintained at 33.37% in this year.

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