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Bear of the Day: UniFirst Corporation (UNF)

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Benjamin Rains
·3 min read
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UniFirst Corporation (UNF) stock has surged roughly 30% since the end of October, helping it recover from its post-Q4 earnings release downturn. The comeback also likely stems from the vaccine positivity, which has investors jumping back into the work uniform stock. That said, its near-term outlook remains somewhat challenging.

Outside Its Control

UniFirst is a company focused on the rental, lease, and sale of work clothing, uniforms, protective apparel, facility service products, and much more. The Wilmington, Massachusetts-based firm serves every industry from healthcare to foodservice and far beyond throughout the U.S., Canada, and Europe.

UNF had been steadily growing its sales for years, with its only recent setbacks a 1% decline in 2009 and a small, 0.3% decline during its fiscal year 2020 that ended in late August. However, things were a tad worse more recently and on the bottom line.

For instance, UNF’s Q3 sales dipped 2% and Q4 fell 11%. On top of the sales pullback, UNF’s full-year operating income fell 26% and adjusted earnings fell 24%.

All things considered, some might have expected UNF to have taken a bigger hit, given the economic devastation that the coronavirus has caused. “Overall, we are pleased with our results for the fourth quarter and full fiscal year given the headwinds that we faced during this unprecedented time in our history,” CEO Steven Sintros said in prepared remarks last quarter.

“Our ability to continue generating solid results and strong cash flows speaks to the resiliency of our company and the value of the products and services that we provide to our customers.”

 

 

 

 

 

 

 

 

 

 

 

 

What’s Next?

As we mentioned at the top, UNF stock has climbed roughly 30% since the end of October. This came after its post-earnings release pullback and coincided with the positive vaccine news that has sent the market to new highs. Clearly, UNF would stand to benefit if more areas of the economy, especially those hard-hit spaces, are able to get back up and running.  

The run has pushed the stock right back up against its January 2020 highs, which might mean UNF is a little overheated considering that Zacks estimates call for its sales to fall over 5% in Q1 and 3% in Q2.

Meanwhile, its adjusted earnings are projected to sink by 33% and 6%, respectively over this stretch. UNF’s full-year FY21 EPS estimate has also fallen 12% since its last report, with FY22 down 8%.

Bottom Line

UniFirst’s downward earnings revision trends help it grab a Zacks Rank #5 (Strong Sell) at the moment. The stock is also part of an industry that rests in the bottom 4% of our over 250 Zacks industries.

That said, the company still pays a dividend and investors might want to keep an eye on UNF when it reports its first quarter FY21 results on January 6.

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