Last Chance: Get 30 Days of MarketBeat All Access for FREE, then just $399 $199 for the year.
  •  days
  •  Hours
  •  Minutes
  •  Seconds
×
EXTENDED - TODAY ONLY: MarketBeat All Access For Just $399 $199 (save 50%)
×
S&P 500   3,963.94
DOW   33,849.46
QQQ   282.71
Wall Street slips as lockdown protests spread in China
The Humble Mineral at the Heart of the EV Revolution (Not Lithium) (Ad)
China virus protests hit Hong Kong after mainland rallies
Is Snowflake Poised for A Rebound After Its Recent Tumble?
The WORST National Security Threat To The USA Since The 1973 Arab Oil Embargo? (Ad)
Can I Apply for Supplemental Security Income Online?
Check Into The Hotel Rebound With These Welcoming Stocks
The Critical Minerals Race: U.S. v China (Ad)
Impeachment talk at Trump Org. trial: Did witness misspeak?
These 3 Apparel Stocks Are Fit for a Comeback
S&P 500   3,963.94
DOW   33,849.46
QQQ   282.71
Wall Street slips as lockdown protests spread in China
The Humble Mineral at the Heart of the EV Revolution (Not Lithium) (Ad)
China virus protests hit Hong Kong after mainland rallies
Is Snowflake Poised for A Rebound After Its Recent Tumble?
The WORST National Security Threat To The USA Since The 1973 Arab Oil Embargo? (Ad)
Can I Apply for Supplemental Security Income Online?
Check Into The Hotel Rebound With These Welcoming Stocks
The Critical Minerals Race: U.S. v China (Ad)
Impeachment talk at Trump Org. trial: Did witness misspeak?
These 3 Apparel Stocks Are Fit for a Comeback
S&P 500   3,963.94
DOW   33,849.46
QQQ   282.71
Wall Street slips as lockdown protests spread in China
The Humble Mineral at the Heart of the EV Revolution (Not Lithium) (Ad)
China virus protests hit Hong Kong after mainland rallies
Is Snowflake Poised for A Rebound After Its Recent Tumble?
The WORST National Security Threat To The USA Since The 1973 Arab Oil Embargo? (Ad)
Can I Apply for Supplemental Security Income Online?
Check Into The Hotel Rebound With These Welcoming Stocks
The Critical Minerals Race: U.S. v China (Ad)
Impeachment talk at Trump Org. trial: Did witness misspeak?
These 3 Apparel Stocks Are Fit for a Comeback
S&P 500   3,963.94
DOW   33,849.46
QQQ   282.71
Wall Street slips as lockdown protests spread in China
The Humble Mineral at the Heart of the EV Revolution (Not Lithium) (Ad)
China virus protests hit Hong Kong after mainland rallies
Is Snowflake Poised for A Rebound After Its Recent Tumble?
The WORST National Security Threat To The USA Since The 1973 Arab Oil Embargo? (Ad)
Can I Apply for Supplemental Security Income Online?
Check Into The Hotel Rebound With These Welcoming Stocks
The Critical Minerals Race: U.S. v China (Ad)
Impeachment talk at Trump Org. trial: Did witness misspeak?
These 3 Apparel Stocks Are Fit for a Comeback

Don’t Bet On A Rebound In Unifirst, Yet 

Don’t Bet On A Rebound In Unifirst, Yet 

Growing Pains Cut Into Unifirst Results 

Unifirst (NASDAQ: UNF) has been working hard to grow its business in an effort to compete more directly with uniform and business services company Cintas (NASDAQ: CTAS). Looking at the top line, those efforts are paying off but it is costing the company on the bottom line. The bottom-line results, and the guidance, reveal not only the impact of aggressive internal efforts to retain employees, and clients, and expand the brand but the impacts of inflation as well. In our view, Unifirst is well-positioned for the times but now isn’t the right time to buy into the story. 

Unifirst Grows Revenue But Margins Contract

Unifirst had a good quarter when looking at the top line and it even beat the consensus but that is about all the good news we have. The company reported $511.55 in consolidated revenue for a gain of 10.2% over last year but significant margin compression is present as well. The gains were driven by a 10% increase in core Laundry sales that were compounded by a 7.7% increase in specialty garments. 

Moving on to the margins, the company reported a 37.8% decline in operating income, a 40.3% decline in net income, and a 40% decline in GAAP EPS that is due to the combination of growth investments and inflation. The company says growth efforts trimmed $11.4million off of the income which is enough to offset some but not all of the margin decline. When adjusting for those costs, the operating and net income declines improve to -16% and -20% but are still deep in negative territory.  Looking forward, the company sees these pressures, both of them, continuing in the 4th quarter and have adjusted the guidance accordingly. The company is looking for revenue above the previously stated range and the Marketbeat.com consensus but reduced the outlook for margin. The new earnings guidance is now below the previously stated range and the Marketbeat.com consensus and we see downside risk in the numbers. One of the driving forces of the business is tight labor market conditions, conditions that are presenting problems for Unifirst too. 


Unifirst Returns Capital To Shareholders 

Unifirst pays a very safe dividend albeit with a small yield. The stock is yielding about 0.75% compared to Cintas's 1.05% but it does trade at a lower valuation. The dividend is backed up by a 15% payout ratio and a debt-free, cash-heavy balance sheet so we are expecting increases to continue. The company has increased the payout for 5 years and at an aggressive 50% CAGR but we see the growth rate falling over time. In addition, the company is buying back stock and purchased $15.7 million worth of shares in Q3. This leaves about $71.6 million under the current authorization or roughly 2.3% of the market cap with shares trading at $162. 

The Technical Outlook: Unifirst Might Be At The Bottom

Shares of Unifirst might be at the bottom but we’re not betting on it just yet. The price action is up in the wake of the report but not in any way we’d call bullish. At best, shares of this stock may wallow at or near the current level but we aren’t expecting a rebound without margin and earnings improvement. Until then, there is a risk the downtrend will continue and move the price action below the $155 level and bring the COVID-induced low back into play. 

Don’t Bet On A Rebound In Unifirst, Yet 

7 Stocks with a Great Setup for 2023

2022 is nearly in the books, and for many investors turning the page to a new year can't come soon enough. Will 2023 be better for stocks? If history is a guide it will be.

In the 12 months following mid-term elections (the elections held in the middle of a president's four-year term), stocks have performed well. This is typically because mid-term elections tend not to go well for the party that sits in the White House.

The reasons for that trend are not something that's in our wheelhouse. We're just looking at what it means for stocks. And what it suggests is that next year the markets could see a strong recovery…at some point. But as is frequently the case, you have to be in the right stocks.  

That's the focus of this special presentation. We're taking a look at seven stocks that have a strong case to be made for growth in the coming year. And some of these stocks are offering a good entry point for investors right now.

View the Stocks Here .

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Cintas (CTAS)
2.2978 of 5 stars
$454.34-0.4%1.01%38.08Moderate Buy$448.20
Compare These Stocks  Add These Stocks to My Watchlist 

Thomas Hughes

About Thomas Hughes

Contributing Author: Technical and Fundamental Analysis

Thomas got his start with the markets while working as a Chef. In 2005 a chance invitation to attend the seminar “How To Buy And Sell Your Own Stocks” altered his worldview. Soon trading and stocks consumed his every waking moment to the point of excluding all else. Thomas now enjoys a much different lifestyle engaged in his true passion, uncovering great investments.
Contact Thomas Hughes via email at tmhughes.writeon@gmail.com.