UniFirst Corporation (UNF) reported a 12% jump in earnings for the first quarter of fiscal 2019 helped by higher revenues as well as lower income taxes. The results exceeded analysts’ expectations. The uniform provider maintained its revenue outlook for fiscal 2019 while narrowing its earnings guidance.
Net income climbed 12% to $38.3 million and earnings jumped 19.2% to $1.99 per share. The results are benefited by a gain from the settlement of environmental litigation, and a decline in tax rate due to the positive impact of the recent US tax reform.
Revenue grew 5.5% to $438.6 million. Core Laundry revenues increased 4.5% and revenues from Specialty Garments segment climbed 21.2%.
The results of the Specialty Garments segment can vary significantly due to seasonality and the timing of reactor outages and projects. This segment’s top-line benefited from acquisitions in fiscal 2018 that increased quarterly revenues by 11.3%, increased outage and project-based activity at the segment’s Canadian customers and solid growth from its cleanroom division.
Looking ahead into fiscal 2019, the company continues to expect its revenues to be in the range of $1.765 billion to $1.785 billion. Earnings guidance are narrowed to the range of $6.65 to $6.90 per share from the prior range of $6.65 to $7.05. The earnings outlook revision was due to the increases that the company is experiencing primarily in its payroll costs and merchandise amortization.
On December 28, 2018, UniFirst entered into a settlement agreement with its lead contractor for the version of the CRM system with respect to which the company recorded the impairment charge of $55.8 million during fiscal 2017. As part of this, UniFirst will record a gain of $20.3 million in its second quarter of 2019, which includes its receipt of a one-time cash payment in the amount of $13 million as well as the forgiveness of amounts previously due to the contractor.
On January 2, 2019, the company’s Board of Directors approved a share repurchase program authorizing UniFirst to repurchase up to $100 million of its outstanding shares of common stock.
UniFirst continues to maintain a strong balance sheet with no long-term debt and significant cash balances. At the end of the company’s first quarter, cash, cash equivalents, and short-term investments totaled $276.5 million.
Shares of UniFirst ended Wednesday’s regular session up 1.36% at $145.01 on the NYSE. The stock, which has fallen over 13% in the past three months, is down 0.74% in the premarket session.
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