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On Wednesday, Barclays (LON:BARC) analysts downgraded UniFirst Corporation shares, listed on the New York Stock Exchange under the ticker (NYSE:UNF), from Equalweight to Underweight, also reducing the price target from $180.00 to $152.00. According to InvestingPro data, the stock appears slightly undervalued at current levels, with a market capitalization of $3.2 billion and strong financial health metrics, including a perfect Piotroski Score of 9. The downgrade followed the release of the company’s fiscal second-quarter 2025 results, which Barclays believes confirm a trend of poor organic growth and slow strategic progress.
UniFirst, a provider of workplace uniforms and laundry services, reported its quarterly earnings on Wednesday, which Barclays had anticipated would reflect ongoing challenges. The company maintains solid fundamentals, with a current ratio of 3.38 and more cash than debt on its balance sheet. According to the firm, the company’s performance as a stand-alone entity is likely to continue producing lackluster results, with risks of further deterioration in a challenging macroeconomic environment. Get deeper insights into UniFirst’s financial health and 10+ additional ProTips with InvestingPro.
The analysts at Barclays highlighted that UniFirst’s reluctance to engage with questions about not substantially discussing key transaction terms with Cintas Corporation (NASDAQ:CTAS) suggests an inability to articulate a strategy for creating value independently. Despite UniFirst’s statements indicating some areas of return, including operational execution, and expressing confidence in capturing opportunities and creating value, Barclays remains skeptical.
UniFirst had pointed to fiscal year 2027 as a target for achieving mid-single-digit growth and higher adjusted EBITDA margins. However, Barclays analysts are doubtful that these goals are realistic, given the company’s current trajectory and market conditions.
The downgrade and price target adjustment reflect Barclays’ view that without the prospect of an acquisition premium, UniFirst’s stock may face downward pressure. The firm’s analysis suggests that the company’s stand-alone business prospects are uninspiring and potentially at risk of further decline.
In other recent news, UniFirst Corporation reported its second-quarter financial results for fiscal year 2025, showing a 1.9% increase in revenue to $602.2 million. However, the company missed earnings expectations, with earnings per share (EPS) coming in at $1.22, below the forecasted $1.42. Despite the earnings miss, operating income rose by 11.7% to $31.2 million, and UniFirst management has adjusted its full-year EPS guidance upwards, citing improved margins in its Core Laundry segment. UBS analyst Joshua Chan raised the price target for UniFirst to $196, maintaining a Neutral rating, while noting that the company’s growth and margin improvements are gradual.
UniFirst recently declined a takeover offer from Cintas Corporation, which was considered a potential catalyst for the company’s shares. The rejection underscores UniFirst’s focus on its strategic initiatives and future growth prospects. The company continues to invest in technology and operational improvements, with plans for a full deployment of its ERP system by fiscal 2027. Additionally, UniFirst’s management highlighted improvements in customer retention and operational execution, contributing to a positive outlook for the remainder of the fiscal year.
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