Aramark Holding Corp (NYSE:ARMK) reported earnings on Monday and handily beat the bottom-line estimates, while slightly missing the top-line. Analysts were expecting EPS of $0.22 on revenue of $3.63 billion. The company reported EPS of $0.32 on revenue of $3.62 billion. Further, the company also ratcheted up guidance increasing their estimate from $1.35-$1.45 per share to $1.45-$1.50 for fiscal 2014. This outlook surpasses analyst expectations of EPS of $1.42 per share.
Aramark is delivering organic sales growth on the upper end of their annual guidance framework. Global organic sales growth for the quarter was up 4%, with their North America business growing the top-line by 4%, their international business growing by 6%, and their uniform business increasing 3%. Moreover, their retention rates remains above peers, with mid 90% retention so far for the fiscal year.
In my previous article, "Aramark: Look For Value In This Under-Covered Name," I opined that ARMK was undervalued, as it was poised to benefit from a series of cost cutting initiatives. The crux of the reason for Aramark easily exceeding EPS estimates has been the savings derived from new initiatives. The company has centralized their supply chain and culinary functions that leverage purchasing volumes, protected costs through forward purchasing contracts, and optimized menus through SKU rationalization and menu substitution. The optimization is not complete and management has guided for more savings throughout this year and into 2015. Moreover, savings are coming from lower interest expenses, as the company deleverages. From the same period in 2013, ARMK has $525 million less total debt. With a steadily growing top-line and more cost savings expected, a PE of 2014 earnings of 17x provides a value.
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