G&K Services shares fall after 3rd-qtr profit misses views

MINNETONKA, Minn.—Shares of G&K Services Inc. fell to a 52-week low Tuesday, after the maker and renter of workplace uniforms said its fiscal third-quarter profit fell, missing expectations.

The Minnetonka, Minn.-based company said third-quarter profit fell 12 percent to 54 cents per share, largely because of a lower tax rate in the year-ago period.

Analysts, on average, expected a profit of 56 cents per share in the quarter ended March 29, according to a Thomson Financial poll.

G&K also forecast fourth-quarter guidance below analyst expectations due to higher energy and integration costs and a higher tax rate.

Shares fell $4.43, or 12.5 percent, to $31.04 in afternoon trading. They earlier traded at a 52-week low of $28.08. The stock has traded between $33.91 and $44.46 during the past 52 weeks.

Citi Investment Research analyst Ashwin Shirvaikar said investors overreacted on the company's announcement.

Shirvaikar acknowledged G&K missed expectations in the third quarter and guided below expectations for the fourth quarter.

"Economic softness and client losses hit the direct sale unit and organic growth slowed in rentals," he said. "However, cash flow remained strong and the value appears compelling after the large dip in shares."

He kept his "Buy" rating on the stock "with a longer-term" view, but lowered its price target to $38 from $49.