Bull of the Day: Aramark (ARMK) - Bull of the Day

After a miserable day like we just saw yesterday, it's tough to jump back in and give a positive spin on anything. It seemed like there was no place to hide unless you were holding GoPro GPRO or Zoes ZOES. The rest of the market got taken out back behind the woodshed. The sell-off was relentless and affected every sector of the broad market.

But I thought given the situation in the market right now it may make sense to find something that's going to be a bit more defensive. I set out to find a stock we could look at that is an industry that is non-cyclical and could hold up through tough time. I'm not saying the economy is suddenly going to head south. I'm just saying it would be nice to find an old school company with some solid earnings we can sink our teeth into.

Aramark ARMK is a $14 billion global provider of award winning services in food, facilities management, and uniforms. If the fourth quarter goes anything like Q3 2014 was, investors are in for some good news right around the quarter. Q3 saw sales of $3.6 billion with organic growth of 4%. Adjusted operating income was up 10% to $192.4 million while operating income came in at $141.3 million.

This amounted to EPS of 19 cents with year-to-date sales topping $10.9 billion. This caused the company to raise its full year guidance to a range of $1.45 to $1.50. President and CEO Eric J. Floss stated, “I am pleased to report another quarter of strong business results achieved within a challenging consumer and economic environment. Our performance reflects solid execution against a sound strategy and was broad-based across the segments and geographies of our portfolio. Based upon this strength and our overall business momentum, we are increasing our full-year 2014 earnings outlook.”

These bullish comments from the CEO definitely influenced analysts covering the stock. Two analysts revised their current year estimates up from $1.27 to $1.33 and next year up from $1.38 to $1.47. Add this to the three upside earnings surprises in a row and you see why ARMK is currently a Zacks Rank #1 (Strong Buy).

This market has made it pretty hard to find a chart worthy of a buy recommendation. Major support levels have been tested and ruthlessly violated on this sharp downturn we saw yesterday. As for Aramark stock, this hasn't really been the case. Since going public at the end of December 2013, ARMK has bounced between $22.50 and $30.

The top of this range proved to be a little too rich for investors as that level was hit twice in March only to see the stock reverse and come back down for find a new bottom of the range at $25 in June. Since then the range has tightened even more, with most of the price action happening between that level and $28.

The pullback over the last few days ARMK down from the high $27s to the $26.60 level it closed at Thursday. But there is some good news regarding the pullback, we're still trading above the 40 day moving average. Even though the average has a neutral to negative slope right now, trading above it gives the stock an overall bullish bias. Investors looking to get long should park their stops on the shy side of August's $25.62 low. 

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