Bull Of The Day: UniFirst (UNF)
Zacks Investment Research | Jan 30, 2020 06:13AM ET
UniFirst Corporation (UNF) is benefiting from the strong labor market. This Zacks Rank #1 (Strong Buy) beat for the fourth quarter in a row recently.
UniFirst supplies and handles servicing of uniform and workwear programs, as well as the delivery of facility service programs. It has 260 service locations with over 300,000 customer locations. It outfits nearly 2 million workers each business day.
Another Beat in the Fiscal First Quarter
On Jan 8, UniFirst reported its fiscal first quarter 2020 results and beat the Zacks Consensus for the fourth quarter in a row.
The earnings came in at $2.52 versus the Zacks Consensus of $2.01, or a 25.4% beat.
Revenue was up 6.1% to $465.4 million. Core laundry operations rose 6.6% to $416.3 million.
Operating margin in laundry rose to 12.9% from 11.5% a year ago. The increase was primarily due to lower energy and selling payroll and depreciation and amortization as a percentage of revenues as well as the effect of other revenue adjustments.
The second segment, Specialty Garments, saw a 3% decrease in revenue to $33.4 million. This was mostly due to decreased outage activity in the US and Canadian nuclear operations which was partially offset by strong growth in the cleanroom operations.
Specialty Garments' results can vary significantly due to seasonality and the timing of reactor outages and projects.
Reduced the High End of its Full Year Guidance
UniFirst reduced its full year EPS guidance, but only on the high end. The new range is $7.60 to $7.92 due to reduced business activity and wearer levels in the energy dependent markets. The energy industry suffered a slowdown in 2019 and that has shown up in related businesses.
The company doesn't assume any significant further deterioration in the energy sector or the overall economy.
The analysts are more bullish than the company, however.
4 estimates have been raised for fiscal 2020 since the earnings report, pushing the Zacks Consensus up to $8.16 from $8.02. That's above the guidance range.
4 estimates were also raised for fiscal 2021, pushing up the Zacks Consensus to $8.68 from $8.44 over the last month. That's earnings growth of 6.5%.
Good News Priced In?
Shares have soared 52% over the last year and are near 5-year highs.
They trade with a forward P/E of 25.6, so you can't call them cheap.
Get The News You Want
However, the company has no long-term debt and has been buying back shares. It also pays a dividend, currently yielding 0.5%.
UniFirst is the only Zacks Rank #1 (Strong Buy) stock among the uniform makers. Cintas (CTAS) is a Zacks Rank #2 (Buy) and Superior Uniform Group (SGC) is a Zacks Rank #3 (Hold).
For those looking for a company that is cashing in on the strong job market, UniFirst is one to keep on the shortlist.
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