Cintas Corporation (CTAS): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
We are changing our recommendation on Cintas from Neutral to Outperform largely on the back of positive earnings estimate revisions. Cintas reported solid fiscal 2015 first quarter results with nearly 26% year-over-year increase in earnings, surpassing the Zacks Consensus Estimate by $0.02. The company is witnessing strong growth across major segments, and is looking to build on this momentum, as it increasingly focuses on fast-growing rental first aid and direct sale businesses. Cintas also enjoys significant scale advantages with regard to its route-based network, which in turn boosts its competitiveness. In addition, its new partnership with Shred-it International's shareholders is expected to reap synergistic benefits in the long run. However, intense competitive pressure and foreign currency risks might peg back its profitability to some extent.

Overview:

Based in Cincinnati, Ohio, Cintas Corporation provides specialized services to businesses of all types throughout North America. The company designs, manufactures, implements corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products and first aid and safety products for diversified businesses. Cintas operates under two operating segments, Rental Uniforms and Ancillary Products, and Other Services.

The Rental Uniforms and Ancillary Products: This segment designs and manufactures corporate identity uniforms, which, along with other garments, mats, mops and shop towels, are rented out. The segment also provides restroom and hygiene products and services.

The Other Services: This segment consists of Uniform Direct Sales and First Aid, Safety and Fire Protection.

The Uniform Direct Sales segment includes the company's national account sales division, which directly sells uniforms, brand-new promotional products and other related products to customers such as airlines, hotels, and restaurants of the region. It also includes Cintas' direct sale catalog, which directly sells uniforms and related products, primarily to local customers, who also rent products from the company.

The First Aid, Safety, and Fire Protection Services segment is involved in the on-site delivery of first aid products, safety products and automatic defibrillators, and provides safety training to the Cintas Corporation's customers and their employees. The company inspects repairs and recharges portable fire extinguishers and sprinkler systems, and provides and services emergency lighting systems as well as kitchen fire suppression systems. Cintas is the largest on-site provider of first aid and safety products in North America and the second largest provider of fire protection services.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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