Why G&K Services (GK) Stock Is Up In Pre-Market Trading Today

NEW YORK (TheStreet) --Shares of G&K Services  (GK) are higher by 1.06% to $52.67 in pre-market trading on Friday after the company reported strong 2014 second-quarter earnings on Thursday.

The branded uniform and facility services program provider said net income for the most recent quarter rose to $15.7 million, or 78 cents a share, from $8 million, or 40 cents a share for the 2013 second quarter.

Revenue increased to $229.7 million for the 2014 second quarter, from $219.4 million for the same quarter last year.

Additionally, analysts at JPMorgan (JPM) raised their rating on G&K Services to “overweight” from “neutral” based on the company’s second-quarter results.

Separately, TheStreet Ratings team rates G&K SERVICES INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate G&K SERVICES INC (GK) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 5.1%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.15, which illustrates the ability to avoid short-term cash problems.
  • 36.09% is the gross profit margin for G&K SERVICES INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, GK's net profit margin of 4.53% significantly trails the industry average.
  • G&K SERVICES INC's earnings per share declined by 26.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, G&K SERVICES INC increased its bottom line by earning $2.35 versus $1.29 in the prior year. This year, the market expects an improvement in earnings ($2.88 versus $2.35).
  • You can view the full analysis from the report here: GK Ratings Report
EXCLUSIVE OFFER: See inside Jim Cramer's multi-million dollar charitable trust portfolio to see the stocks he and Stephanie Link think could be potentially HUGE winners. Click here to see the holdings for FREE
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

If you liked this article you might like

G&K Services (GK) Stock Spikes, to be Acquired by Cintas in $2.2 Billion Deal

Insider Trading Alert - RGR, NSP And GK Traded By Insiders

Trifecta Stocks: Dear Prudence, Opportunities Will Come Into Play

Trifecta Stocks: Dear Prudence, Opportunities Will Come Into Play

Insider Trading Alert - SZYM, GK And RGLD Traded By Insiders

Insider Trading Alert - UG, ACTG And GK Traded By Insiders