Baird has adjusted its price target for UniFirst Corp (NYSE: NYSE:UNF), increasing it slightly from $199.00 to $200.00, while keeping a Neutral rating on the stock.
The adjustment comes as UniFirst's management indicated challenges in achieving organic growth in fiscal year 2025. Despite this, the market's expectations last quarter did not align with the company's guidance.
UniFirst, which specializes in uniform rental and facility services, has guided for flat Adjusted EBITDA margins. However, earnings per share (EPS) are expected to be impacted due to higher depreciation from the company's recent investments. This depreciation was seen as a key factor in the stock's recent performance.
The company's Adjusted EBITDA guidance fell short of the consensus by approximately $10 million, after accounting for a definitional change. The shortfall in guidance reflects a more conservative outlook than what analysts had anticipated.
The hopes for continued margin improvement, which were high in the second half of fiscal year 2024, have been tempered. The outlook for margins has shifted to a flat or unchanged projection, which has been characterized as somewhat disappointing.
In other recent news, UniFirst Corporation reported record full-year revenues of $2.427 billion, an 8.7% increase from the prior fiscal year. The company's fourth quarter also saw strong performance with revenues rising to $639.9 million, an 11.9% increase, while net income stood at $44.6 million.
Adjusted EBITDA for the quarter also surged 32.5% year-over-year to $95 million. These recent developments are largely attributed to an additional week of operations and the acquisition of Clean Uniform.
Looking ahead, UniFirst projects its fiscal 2025 revenue to be between $2.425 billion and $2.445 billion, with EPS ranging from $6.79 to $7.19. The company's Core Laundry Operations, which experienced a solid 4.6% organic growth for the year, are expected to grow between 1.3% and 2.3% in fiscal 2025. However, Specialty Garments revenues are anticipated to decrease by 4%.
The First Aid and Safety division, which exceeded $100 million in revenue, anticipates double-digit growth next year. Despite these promising figures, UniFirst faces challenges in customer retention and competitive pricing, which may impact growth. The market for large accounts remains healthy, but replicating last year's growth may prove challenging.
InvestingPro Insights
Despite the challenges highlighted in Baird's analysis, UniFirst Corp (NYSE:UNF) demonstrates several strengths according to InvestingPro data. The company's revenue growth of 8.7% over the last twelve months and a robust 11.89% quarterly revenue growth in Q4 2024 indicate a solid business performance. This growth aligns with the company's ongoing investments, which are expected to impact earnings due to higher depreciation.
InvestingPro Tips reveal that UniFirst has maintained dividend payments for 42 consecutive years and has raised its dividend for 6 consecutive years. This consistent dividend history suggests financial stability, which could be reassuring for investors in light of the conservative outlook for fiscal year 2025.
Additionally, UniFirst holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations. These factors contribute to the company's financial health, potentially providing a buffer against the challenges mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for UniFirst, providing deeper insights into the company's financial position and market performance.
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