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Here's Why You Should Consider Buying UniFirst (UNF) Stock

Zacks Equity Research
·4 mins read

UniFirst Corporation UNF can be considered a good investment option, supported by its strong fundamentals and growth prospects. Also, upward revisions in its earnings estimates are reflective of the prevailing bullish sentiments for the stock.

The company is based in Wilmington, MA, and has a market capitalization of $3.3 billion. It belongs to the Zacks Uniform and Related industry, which belongs to the broader Zacks Industrial Products sector. The industry currently carries a Zacks Industry Rank #44, which places it in the top 17% of more than 250 Zacks industries. Notably, the top 50% of the Zacks-ranked industries tend to outperform the bottom 50% by a factor of more than 2 to 1.

The company presently sports a Zacks Rank #1 (Strong Buy) and has a VGM Score of A.

Below we discussed why it is worth investing in UniFirst.

Price Performance and Multiple Tailwinds: Market sentiments are positive for the stock, as is evident from its impressive share price performance. In the past three months, the company’s share price has increased 36.4%. Further, the industry grew 54.9%, while the sector and the S&P 500 rose 37.9% and 34.5%, respectively, during the same time frame.






It is worth mentioning here that the company’s financial performance has been impressive in the past four quarters, with earnings beat recorded in all quarters. Earnings surprise, on average, for the four quarters is 25.54%. In the last reported quarter, the company’s earnings and sales surpassed estimates by 9.64% and 1.11%, respectively.

Though pandemic-led woes are concerning, UniFirst’s well-diversified business structure might prove beneficial in the quarters ahead. The company’s services are segregated into Specialty Garments, Core Laundry Operations and First Aid. Also, it has exposure in Canada, the United States and Europe.

Also, the company’s commitment toward providing value-added services and products to its customers as well as high local footprints might support performance. Broader factors, including a shift toward service-oriented economy and regulations related to safety workwear, might also benefit.

Buyouts: The company believes in gaining market share, enhancing product lines and boosting growth opportunities through acquisitions. In the first half of fiscal 2020 (ended February 2020), it completed eight acquisitions by investing $41.3 million.

Notably, the above-mentioned eight buyouts include a $38.8-million acquisition of Missouri-based industrial laundry business.

Shareholder-Friendly Policies: Over time, UniFirst has been rewarding shareholders handsomely. It distributed dividends of $6.6 million in the first half of fiscal 2020, reflecting an increase of 59.6% from the year-ago comparable period. It is worth mentioning here that the company announced a hike of 13.75 cents per share in its quarterly dividend rate in the first quarter of fiscal 2020 (ended November 2019).

Also, it bought back common shares worth $14.2 million in the first half of fiscal 2020, higher than $6.3 million in the previous-year period. Exiting the first half of fiscal 2020, the company repurchased $44.7 million worth shares from its $100-million buyback program announced in January 2019.

Earnings Estimate Trend: UniFirst’s earnings estimates have been revised positively in the past 60 days. Currently, the Zacks Consensus Estimate for its earnings is pegged at $1.17 for the third quarter of fiscal 2020 (ended May 2020, results are awaited) and $1.28 for the fourth quarter of fiscal 2020 (ending August 2020), reflecting growth of 4.5% and 4.1% from the respective 60-day-ago figures.

Also, the consensus estimate for fiscal 2020 (ending August 2020) earnings is pegged at $6.79, reflecting growth of 1.5% from the 60-day-ago figure, while the same for fiscal 2021 (ending August 2021) at $7.86 suggests growth of 1.3%.

Unifirst Corporation Price and Consensus

 

Unifirst Corporation Price and Consensus
Unifirst Corporation Price and Consensus

Unifirst Corporation price-consensus-chart | Unifirst Corporation Quote

Other Key Picks

Three other top-ranked stocks in the sector are Applied Industrial Technologies, Inc. AIT, Altra Industrial Motion Corp. AIMC and Parker-Hannifin Corporation PH. While both Applied Industrial and Altra Industrial Motion sport a Zacks Rank #1, Parker-Hannifin carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for the stocks have improved for the current year. Further, positive earnings surprise for the last reported quarter was 2.00% for Applied Industrial, 47.73% for Altra Industrial Motion and 29.20% for Parker-Hannifin.

5 Stocks to Soar Past the Pandemic: In addition to the companies you learned about above, we invite you to learn about 5 cutting-edge stocks that could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of the decade.

See the 5 high-tech stocks now>>


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Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
 
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Zacks Investment Research