On Thursday, UBS updated its outlook on UniFirst Corp (NYSE: NYSE:UNF), increasing the price target to $186.00 from the previous $184.00 while maintaining a Neutral rating on the stock. UniFirst shares saw a 3% rise on Wednesday following the release of the company's fiscal second-quarter results.
Although these results did not meet consensus expectations, the market's response was muted, with the company's core guidance for fiscal year 2024 remaining largely unchanged.
The second quarter showed that Core Laundry margins were lower than anticipated, and with a year-over-year decline of 80 basis points in the first half, improvement in the second half will be necessary to achieve the forecasted slight expansion in full-year margins.
Despite some adjustments due to charges, UniFirst's full-year earnings per share (EPS) guidance remains consistent, indicating expectations for a performance in line with projections for the latter half of the year.
UBS slightly lowered its earnings estimates for UniFirst, citing a more conservative stance on margin predictions. However, the firm considers the current 9.5 times next twelve months (NTM) enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple to be fair.
This valuation is compared to the stock's historical average of 11 times. The reassessment by UBS reflects a wait-and-see approach, pending further evidence of UniFirst's capability to achieve margin recovery.
InvestingPro Insights
As UniFirst Corp (NYSE: UNF) navigates its fiscal year with an eye on margin recovery, the latest data from InvestingPro provides a snapshot of the company's financial health and market valuation. UniFirst's market capitalization stands at $3.24 billion, reflecting its overall market value. The company's revenue growth over the last twelve months as of Q2 2024 is notable at 10.43%, indicating a solid top-line expansion.
InvestingPro Tips highlight that UniFirst holds more cash than debt, a sign of financial stability, and has impressively maintained dividend payments for 42 consecutive years, which could be of particular interest to income-focused investors. Moreover, UniFirst has raised its dividend for 6 consecutive years, demonstrating a commitment to returning value to shareholders. The company's liquid assets also exceed short-term obligations, further underscoring its solid liquidity position.
For investors looking for deeper analysis and additional insights, there are more InvestingPro Tips available, which could be accessed through an InvestingPro subscription. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of actionable insights that could inform your investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.