J.P. Morgan Remains Neutral on UniFirst (NYSE: UNF)

Analysts at J.P. Morgan reiterated their neutral rating on UniFirst (NYSE: UNF) today. They noted that, “Wednesday morning, UniFirst reported a modest beat with 2QF10 (Feb) EPS of $0.83, two pennies above our estimate of $0.81. Total revenues also came in higher at $253.6mn, compared to our estimate of $244.6mn.”

The analysts commented on a decline in gross margins by saying, “UniFirst’s gross margins contracted 370 bps seq to 38.1% in 2QF10 (Feb), largely as we had expected. Higher payroll, merchandise amortization, and energy costs all contributed to the margin contraction.”

There were some positive findings in the area of business expansion. “UNF remains committed to increasing its new business and enhancing its sales productivity, and we find the company’s efforts impressive.” They added, “During this most recent recession, the company increased headcount on average by 5-7% y/y.”

J.P. Morgan raised FY10 EPS estimates from $3.50 to $3.60 and raised their Dec ’10 price target from $50 to $54.