KeyBanc Downgrades G&K Services Inc. (GK) to Hold

KeyBanc downgraded G&K Services Inc. (NASDAQ: GK) from Buy to Hold and removed its price target (prior $63.00).

Analyst Joe Box said, "We are downgrading G&K Services, Inc. (GK-NASDAQ) to HOLD from BUY as the shares have exceeded our $63 price target and we believe the valuation has become less compelling to put new money to work."

"While we acknowledge that the recent appreciation in GK’s shares has been warranted given outstanding execution (see takeaways from solid fiscal 1Q15 results below) and our bias is for further margin and earnings improvement over the next 12-24 months, with the shares trading at 17.6x and 9.1x our respective FY16 EPS and EBITDA estimates, it would appear that many of GK’s firm-specific catalysts may be priced into the shares. Therefore, we are comfortable moving to the sidelines and waiting for either: 1) a pullback in the shares; 2) greater conviction that GK can expand its operating margins beyond the 12-13% range that we have previously highlighted as a target (modeling 12.6% in FY16); or 3) better visibility on an acceleration in the add/quit metric, which, to this point, has been status quo essentially for several years," he added.

For an analyst ratings summary and ratings history on G&K Services Inc. click here. For more ratings news on G&K Services Inc. click here.

Shares of G&K Services Inc. closed at $63.46 yesterday.

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