) record second quarter fiscal 2014 (ended Nov 30, 2013) earnings
of 70 cents per share beat the Zacks Consensus Estimate by a
couple of cents and compared favorably with the year-ago tally of
63 cents a share. The 11.1% year-over-year increase in earnings
was primarily attributable to a healthy improvement in the
top-line and reduced outstanding shares. Net income for the
reported quarter aggregated $84.9 million compared with $78.0
million in the year-earlier quarter.
Total quarterly revenue increased 7.9% year over year to $1.14
billion, slightly ahead of the Zacks Consensus Estimate of $1.11
billion. Organic growth (adjusted for the impact of acquisitions)
aggregated 7.1% with a strong execution of operational plans,
stringent cost-control measures and improvement in efficiency
Operating income in the reported quarter climbed 10.0% to $153.0
million. Operating margin was 13.4% compared with 13.1% in the
Rental Uniforms and Ancillary Products
revenues for the quarter improved 6.4% year over year to $804.3
million, accounting for 70% of the total company revenue. Organic
growth of the segment was 6.4%. Gross margin increased to 42.9%
from 41.9% in the year-ago quarter due to improved efficiency
levels from added route capacity.
Uniform Direct Sales
were $121.9 million (up 10.6% year over year) and accounted for
11% of the company's revenues. Gross margin improved to 28.8%
from 27.4% in the year-ago quarter due to a greater mix of
hospitality account sales and better leveraging of distribution
First Aid, Safety and Fire Protection Services
revenues climbed 11.7% to $124.6 million, representing 11% of the
company's total revenue. Gross margin improved 100 bps year over
year to 43.4% by leveraging infrastructure facilities for an
improved mix of higher-margin sale items. Organic growth for the
segment totaled 8.8%.
Document Management Services
segment increased 12.2% year over year to $93.0 million,
accounting for 8% of the total company revenue. Gross margin for
the segment was 45.7%, up from prior-year tally of 45.4%. Organic
revenue increased 6.9% year over year. Average recycled paper
prices were $125 per ton, down 17% from the year-ago period.
Cintas has a solid financial position with adequate liquidity.
Cash and cash equivalents were $309.3 million at quarter-end.
Capital expenditures for the quarter were $39.3 million. Cintas
expects capital expenditures for fiscal 2014 to be in the range
of $225 million to $250 million. Long-term debt was $1.31 billion
as of Nov 30, 2013. Cash flow from operations totaled $140.0
million for the reported quarter compared with $132.0 million in
the year-ago period. Free cash flow for the first half of fiscal
2014 increased to $145.5 million from $128.2 million in the
During the reported quarter, Cintas purchased 1.2 million shares
as part of its share repurchase program. As of Dec 19, 2013,
Cintas had $505 million worth of shares available to purchase
under the July 2013 program.
Cintas paid an annual dividend of 77 cents per share, which
represented a 20.3% year-over-year increase from last year's
annual payout of 64 cents. Since its inception, Cintas has
consistently increased its dividend and the current dividend
payout is its 31st consecutive dividend.
Fiscal 2014 Outlook
For fiscal 2014, Cintas updated its revenue guidance in the range
of $4.525 billion-$4.575 billion from $4.5 billion-$4.6 billion
expected earlier, assuming no further deterioration of the U.S.
economy and no additional share repurchases. Earnings guidance
was also revised from its earlier range of $2.70-$2.79 per share
Although Cintas' second quarter fiscal 2014 results beat the
overall estimates, it failed to generate much interest among
investors as share pries remained almost flat after the earnings
Cintas continues to deliver organic growth through superior
execution of its operational plans. The company witnessed
top-line growth across all the segments in the reported quarter
and expects to continue this bull run in the coming quarters as
well. We also remain encouraged about the relatively strong
quarterly performance of the company.
Cintas presently has a Zacks Rank #2 (Buy). Other companies in
the industry worth reckoning include
Raven Industries Inc.
), each carrying a Zacks Rank #2 (Buy).
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