Shares of UniFirst Corporation (UNF) plummeted 5.57% during Thursday's trading session following the company's second-quarter fiscal 2025 earnings report and the revelation that discussions with Cintas regarding a potential acquisition had ceased.
The uniform rental and workplace services provider reported Q2 adjusted earnings per share of $1.31, which beat the Zacks Consensus Estimate of $1.30. However, the company's outlook and recent developments appear to have disappointed investors:
- UniFirst narrowed its fiscal 2025 revenue guidance to between $2.422 billion and $2.432 billion, reflecting a negative impact from Canadian dollar exchange rates.
- The company disclosed that discussions with Cintas regarding an unsolicited acquisition offer had ended. In January, UniFirst's Board of Directors had rejected Cintas's proposal, citing concerns about the offer price, execution risks, and future growth opportunities.
- Several analysts adjusted their price targets following the earnings release. Baird lowered its target to $197 from $218, while UBS raised its target slightly to $196 from $194, both maintaining neutral ratings on the stock.
During the earnings call, UniFirst CEO Steven Sintros emphasized the company's focus on executing its strategy to drive growth and profitability. "We are pleased with the progress we continue to make in the areas of operational execution and margin enhancement, which allowed us to show solid improvements in operating income and adjusted EBITDA during the quarter, despite the modest growth," Sintros stated.
Despite beating earnings expectations, the combination of tempered guidance, ceased acquisition talks, and analyst adjustments appears to have led investors to reassess UniFirst's near-term prospects, resulting in the significant stock price decline.
