Aramark (NYSE:ARMK) Drops After Missing Revenue Estimates

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Investors were in a bearish mood after Aramark (NYSE:ARMK), a supplier of food, facilities and uniforms, reported lower-than-expected sales during its fiscal fourth quarter.

Shares skid 9.1% on Tuesday to close at $33.15 on volume of 6.96 million shares.

Technically, on the daily chart, the stock made a double top on September 6 and on September 30, after which it plunged through the 20-day and 50-day moving averages on November 10.

Yesterday’s gap-down decline took the stock below the 200-day moving average on high volume, raising the possibility of more downside ahead.

The company employs over 270,000 employees, and serves industries such as educational institutions, hospitals and healthcare, stadiums and arenas, manufacturing facilities, conventions and conferences, correctional facilities and remote workplaces.

Aramark (NYSE:ARMK) disappoints on revenue in FQ4

During the fiscal fourth quarter Aramark reported EPS of $0.49, which beat estimates by $0.03, and revenue of $3.55 billion, which missed by $130 million and was flat year on year.

Though it disappointed on sales, its profitability was cheered by Eric J. Foss, Chairman, President and CEO: “The combination of our strong execution and smart reinvestment in the business propelled Aramark to record-setting profitability and double-digit EPS growth in 2016. Our strategy is working, and as we move forward we will remain focused on driving continued innovation, improving productivity and delivering unparalleled customer service.”

Segment-wise, quarterly sales were up 0.3% in FSS North America, down 2.5% in FSS International and up 1.9% (year on year) in Uniform & Career Apparel. For the company as a whole, sales were down 0.1%.

“Reported and organic sales growth in the fourth quarter for all three business segments was impacted by ongoing energy headwinds versus the prior year,” the company said. “Additionally, both of our FSS segment revenues were impacted by previously announced strategic portfolio actions that reduce revenues, but are accretive to margins.”

On the conference call Foss said the company had achieved a robust quarterly performance and “a record FY16 financial and operating result, with the highest margins and profitability in Aramark’s history.”

For the year as a whole, the company grew its free cash flow by 80%.

It increased its regular quarterly dividend by 8% to 10.3 cents per share.

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