Volatile stock to watch: UniFirst Corp (NYSE: UNF)

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UniFirst Corp (NYSE: UNF) stock fell 3.68% on July 1st, 2020 (Source: Google finance) and continued its bearish market falling over 0.1% on 2nd July, 2020 pre-market session. The company missed the earnings estimates for the third quarter of FY 20. The company’s consolidated operating income fell to $27.7 million from $60.2 million or 54%. Net income for the quarter declined to $21.3 million from $47.2 million. The company has no long-term debt and cash, cash equivalents and short-term investments were of total $421.3 million at the end of the third quarter of fiscal 2020.

UNF in the third quarter of FY 20 has reported the adjusted earnings per share of $1.12, missing the analysts’ estimates for the adjusted earnings per share of $1.17, according to Zacks Investment Research.  The company had reported 1.8 percent fall in the adjusted revenue to $445.5 million in the third quarter of FY 20, beating the analysts’ estimates for revenue of $378.3 million. The overall shortfall effect in revenue got reduced by a large direct sale of $20.1 million to a large healthcare customer as well as strong revenues from the First Aid segment. The consolidated operating margin was 6.2%, and was affected by the revenue shortfall in the US and Canadian laundry operations as well as numerous costs related to the COVID-19 response efforts.

Moreover, Core Laundry operating margin contracted to 5.1% for the third quarter or $19.7 million from 13.4% in prior year or $53.4 million. The segment’s profitability got affected by many items, including the impact of the decline in rental revenues on the cost structure, a higher cost of revenues related to the large $20.1 million direct sale and additional costs the company incurred related to the pandemic. The revenues from the Specialty Garments segment, which delivers specialized nuclear decontamination and cleanroom products and services, fell to $36.2 million from $37.3 million in prior year or 3.1%. This decline was mainly due to lower direct sale activity in the quarter, which was partially offset by growth in the cleanroom and European nuclear operations. The segment’s operating margin expanded to 17.6% or $6.4 million from 14.4% or $5.4 million in the year ago period. This increase was mainly driven by bad debt recovery from a customer in bankruptcy and lower travel-related costs. First Aid segments revenues rose to $20.9 million from $16.6 million in prior year or 26%. This increase was mainly due to increased demand for the segment safety and PPE offerings. Operating margin of the segment contracted to 7.8% from 8.4%, primarily due to higher merchandise costs as a percentage of revenues.

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