Time to Buy These Top-Rated Industrial Product Stocks?




  • In Business
  • 2023-01-25 01:46:01Z
  • By Zacks

Opportunity appears to be brewing in the Industrial Products sector, with Cintas CTAS and Unifirst UNF stock sticking out at the moment.  

These two stocks have acted as a defensive hedge against inflation with a collective +15% total return (including dividends) over the last year compared to the S&P 500's -1%. Even better, over the last five years the combined total return of the Uniform and Related stocks is +149% to crush the benchmarks +52%. 

With that being said, let's take a look at the upside left in these two standout Industrial Product stocks.

Brief Overview

Cintas has an international reach providing specialized services throughout North America with operations in Europe, Asia, and Latin America.

Cintas designs, manufactures, and implements corporate identity uniform programs and provides entrance mats, restroom supplies, promotional products, and first aid among other safety products for diversified businesses.

Similarly, Unifirst's business involves rental leases and the sale of work clothing, uniforms, protective apparel, career wear, and facility service products with operations in the United States and Europe.

Growth Outlook

Both Cintas and Unifirst stock land a Zacks Rank #2 (Buy) in correlation with rising earnings estimate revisions.

Looking at Cintas, earnings estimates for fiscal 2023 have gone up 3% over the last 60 days for fiscal 2023 at $12.68 per share. This would be a 12% increase from fiscal 2022 earnings of $11.28 per share. Plus, earnings are forecasted to grow another 10% in FY24 with earnings estimates slightly up as well over the last two months.

Zacks Investment Research
Zacks Investment Research  


Image Source: Zacks Investment Research

On the top line, sales are anticipated to grow 11% in FY23 and rise another 6% in FY24 to $9.22 billion. More impressive, Fiscal 2024 would be a 34% increase from pre-pandemic levels with 2019 sales at $6.89 billion.

Pivoting to Unifirst, earnings estimates have gone up 3% over the last 30 days for fiscal 2023 to $7.48 per share. Fiscal 2023 would represent 10% growth from FY22 earnings of $6.81 a share. Even better, earnings are projected to grow another 10% in FY24 with earnings estimates going up 2% over the last month.

Zacks Investment Research
Zacks Investment Research  


Image Source: Zacks Investment Research

Unifirst sales are expected to jump 8% in FY23 and rise another 4% in FY24 to $2.25 billion. More importantly, with 2019 sales at $1.80 billion, fiscal 2024 would be a 25% increase from pre-pandemic levels.

Performance & Valuation

The solid top and bottom line growth make Cintas and Unifirst stock look poised to continue their strong performances as the broader market and economy have struggled amid higher inflation.

Over the last year, Cintas stock is up +15% Vs. Unifirst's +2% with both noticeably outperforming the S&P 500's -9%. Looking at the last decade, when including dividends, Cintas's total return is now an astonishing +1,069% to easily top the broader market although UniFirst's +149% has lagged the benchmark.

Zacks Investment Research
Zacks Investment Research  


Image Source: Zacks Investment Research

While Cintas's performance has topped its peer, Unifirst's valuation stands out with UNF stock trading at $195 per share and 25.6X forward earnings. Unifirst trades 24% below its decade-high of 34X and closer to the median of 23.6X.

As for Cintas, its stock trades at $440 per share and 34.5X forward earnings which is 18% beneath its own decade-long high of 42.3X but further above the median of 26.8X. The expected growth of both stocks in the upcoming years supports their valuations despite trading higher than the benchmark's 18.1X forward earnings.

Zacks Investment Research
Zacks Investment Research  


Image Source: Zacks Investment Research

Dividends

Taking a glance at dividends, Cintas's 1.05% annual dividend yield slightly tops Unifirst's 0.65% with both stocks' dividends lagging the S&P 500's average yield of 1.5%.

However, their respectable return to shareholders has certainly been a plus considering Cintas and Unifirst stock have outperformed the broader market over the last year.

Zacks Investment Research
Zacks Investment Research  


Image Source: Zacks Investment Research

Bottom Line

Cintas and Unifirst stocks are both viable options for exposure in the Industrial Products sector and while their business models are similar there should be more than enough room for both companies as it relates to uniform services. This space looks set to expand considering Cintas continued dominance and Unifirst's expansive growth over the last few years.

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Unifirst Corporation (UNF) : Free Stock Analysis Report

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