Market Analysis of ServiceMaster Global Holdings, Inc (NYSE:SERV)

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ServiceMaster Global Holdings, Inc is currently trading at $37.75 per share, (up 0.08%) on May 30, 2017. The company has a market capitalization of $5.06 billion, with a respectable price/earnings ratio of 33.41. There is no dividend or yield to speak of, however the 1-year target estimate price of the stock is $44.13 per share – a 17% premium above the prevailing price. As far as its 1-year performance goes, SERV has a 52-week a low of $32.41 per share and a 52-week high of $42.45 per share. 2016 revenues of $2.75 billion and earnings of $155 million were reported – on par with the 2015 figures.

Actual vs Estimated Earnings of ServiceMaster Global Holdings Inc

But it’s the earnings figures that present a conundrum of sorts to investors. Between Q2 2016 and Q2 2017, its been a yo-yo performance with actual versus estimate earnings. The company recorded an earnings beat in Q2 2016 when actual earnings of $0.67 were reported versus estimates of $0.66. For Q3 2016, the actual earnings came in under expectation at $0.59 with estimated earnings of $0.62. Fast-forward to Q4 2016, actual earnings trumped estimates by $0.04 per share at $0.44. By Q1 2017, actual earnings fell shy of expectations at $0.34 EPS with estimates at $0.38. For Q2 2017, estimated earnings of $0.7 are anticipated.

Ratings History

Thomson Reuters analysts have rated the stock at 2.4 on a rating scale of 1.0 (strong buy) to 5.0 (sell). This indicates that the stock is between a buy and a hold. Just recently, JPMorgan initiated an upgrade of the stock to an overweight rating. From a technical perspective, SERV is trading below its 50-day moving average of $39.30 per share and its 200-day moving average of $37.75 per share. The selloff of the stock took place in early May, but it rebounded. Now the stock is virtually unchanged for the year to date.

Companies Owned and Operated by ServiceMaster Global Holdings Inc

As a Fortune 1000 company, ServiceMaster Global Holdings Inc trades on the New York Stock Exchange as a service industry enterprise. The company has approximately 7000+ license locations, franchises, and company-owned businesses around the world with 13,000+ employees. Some of the brands owned and operated by the company include Merry Maids, Furniture Medic, AmeriSpec, ServiceMaster Clean, Terminix, ARS/Rescue Rooter, and American Home Shield. The latter company is a particularly successful subsidiary of SERV.

American Home Shield currently serves approximately 2 million+ customers across the continental United States, including Washington DC. As the premier provider of home warranties for appliances and home systems, American Home Shield spans the largest home service contracting network in the country. To date, some 11,000 contractors administer home warranties for American Home Shield. The company was founded in 1971 and operated independently for 18 years. ServiceMaster bought out American home Shield which currently employs 1,600 people.

Financial Performance of AHS

The performance and services provided by American Home Shield review indicate that it is an important component of its parent company, SERV. For the year ending December 31, 2016, American Home Shield generated revenues of $1.020 billion with 2016 adjusted EBITDA of $220 million, up 21.6% year on year. In Q4 2016, the company generated a 14% (year on year) increase in earnings, driven largely by a better pricing system and a sharp spike in home warranties. For the full year, AHS was up 11% (year on year) with revenues, and acquisitions.

The company offers home warranties on systems, appliances, and combination packages for things like the replacement and repair of major home systems (doorbells, ductwork and plumbing), air conditioning units, washers and dryers. The company also offers tailored solutions to clients with various add-ons available. It received the prestigious Women’s Choice Award for most recommended home warranty provided between 2014 and 2016, among others. American Home Shield (AHS) is accredited by the BBB (Better Business Bureau).

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