UniFirst Corporation

UniFirst reported a record third quarter as the uniform manufacturing and laundry business remains hot. The company has surprised on estimates the last three quarters on average of 22.37%. UniFirst has a forward P/E of 14.07.

Company Description

UniFirst Corporation (UNF - Snapshot Report) manufactures workplace uniforms, protective clothing and facility services products. The company has 200 customer service, distribution and manufacturing facilities that service 200,000 customer locations in 46 U.S. states, Canada, and Europe.

UniFirst, a Zack's #1 rank (Strong Buy), has been in the business of renting, leasing and selling work clothes since 1936. UNF services 98 of the top 100 metropolitan markets in the United States and a majority of Canada.

The largest portion of the business is the Uniform Rental Service program, which provides a uniform, weekly cleaning, maintenance and any needed replacements for a weekly fee. The company also is big in the laundry services area, with plants throughout the U.S. and Europe.

UNF also specializes in cleaning and decontaminating garments worn by workers who maintain and refuel nuclear power and nuclear processing equipment.

The company's third business segment is distribution and manufacturing. UNF has three manufacturing facilities in the US and Mexico which produce millions of garments. By keeping the manufacturing in-house, it allows the company to provide a certain level of customization for customers.

UniFirst Reports Record Revenues and Earnings for the Third Quarter

On July 2, UniFirst reported third quarter earnings that beat Wall Street estimates by 11.54%, or 9 cents per share. Net income rose 23.8% to $16.9 million, or 87 cents per share, from $13.7 million, or 71 cents a share in the year ago period. Analysts expected 78 cents per share.

For the first nine months of the fiscal year, net income increased 41.6% to $48.7 million, or $2.52 per share, from $34.4 million, or $1.78 per share in 2007.

Revenues jumped 10.8% to a record $254.6 million for the third quarter. For the first three quarters, revenues surged 14.5% to a record $772.2 million. However, the first three quarters were one week longer than fiscal 2007. That extra week occurred in the second quarter of 2008.

The revenue increase was due primarily to growth in the core laundry segment, which represents about 90% of the company's consolidated revenues. Core laundry revenues grew 11.5% for the third quarter compared to 2007.

Higher energy costs are impacting UNF as the company operates a fleet of delivery trucks but the company is, for now, offsetting those increases with lower payroll costs.

Analysts Raise Estimates for the Fourth Quarter

In response to the record earnings in the third quarter and statements from UniFirst that they still believe the year will be a record year for the company, consensus estimates have been rising on the fourth quarter as well as the full year.

In the last week, fourth quarter estimates increased by 4 cents to 68 cents per share from 64 cents per share. For the full year, consensus estimates are up 4% in the last week to $3.19 from $3.08 per share.

Value Fundamentals

UniFirst's forward P/E is 14.07. Its price-to-book is 1.65. The company has a one year return on equity (ROE) of 11.36%. As an added bonus, UNF also has a current dividend yield of 0.30%.

Read the full analyst report on UNF