UniFirst Corporation (NYSE:UNF) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It looks like a credible result overall - although revenues of US$447m were what the analysts expected, UniFirst surprised by delivering a (statutory) profit of US$2.20 per share, an impressive 31% above what was forecast. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on UniFirst after the latest results.
Taking into account the latest results, UniFirst's four analysts currently expect revenues in 2021 to be US$1.80b, approximately in line with the last 12 months. Per-share earnings are expected to rise 9.5% to US$7.50. In the lead-up to this report, the analysts had been modelling revenues of US$1.79b and earnings per share (EPS) of US$7.02 in 2021. So the consensus seems to have become somewhat more optimistic on UniFirst's earnings potential following these results.
The analysts have been lifting their price targets on the back of the earnings upgrade, with the consensus price target rising 19% to US$235. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. The most optimistic UniFirst analyst has a price target of US$240 per share, while the most pessimistic values it at US$230. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that UniFirst's revenue growth will slow down substantially, with revenues next year expected to grow 0.7%, compared to a historical growth rate of 5.5% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 6.6% per year. Factoring in the forecast slowdown in growth, it seems obvious that UniFirst is also expected to grow slower than other industry participants.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around UniFirst's earnings potential next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that UniFirst's revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.
With that in mind, we wouldn't be too quick to come to a conclusion on UniFirst. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for UniFirst going out to 2022, and you can see them free on our platform here..
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