Cintas Corporation (
CTAS
)
Cintas provides highly specialized services to businesses of all
types throughout North America. It is the largest company in its
space and services more than 900,000 businesses. Founded in
1983, Cintas has become the go-to for everything from the design,
manufacture and implementation of corporate identity uniform
programs to entrance mats, restroom supplies, promotional products,
document management and even fire protection, first aid and safety
services.
They have over 430 facilities in the US and Canada that employ
over 30,000 people. The rental division is still the
company's largest but is just a part of their overall pie.
You will find Cintas' floor mats, first aid kits, fire alarms and
suppression systems, hand soaps and air fresheners in many large
and mid-size companies across the US.
Growing Need
On
February 20th
, I noted the bullish fundamental strength of Cintas and the
bullish tone the company took since realizing that they could
deliver strong results even in challenging times. An
improving jobs market and consumer outlook seems to be having a
direct positive effect on Cintas. Anecdotally, it
seems plausible that many consumers and employers alike went into
"panic mode" once the recession hit 3 years ago. Until
recently, this frugal state of mind most likely prevented or slowed
many from spending on discretionary expenses like new uniforms,
mats, first aid kits, etc. In that time, potential
demand built up and now it seems there could be a continued
onslaught of business for companies like Cintas as these
"semi-discretionary" items become a necessity.
Another Strong Quarter
Cintas delivered strong Q3 2012 earnings on March 20th of 58 cents
per share. Earnings were 41.5% higher than the 41 cents
reported in the year-ago quarter; net income increased by 28.7% to
$76 million. The Zacks Consensus Estimate was for 52 cents ahead of
the number. Total revenues in the quarter increased 7.9% year
over year to $1.012 billion, beating the Zacks Consensus Estimate
of $1.008 billion. Organic growth in the quarter was 5.9%.
Their most recent quarter's beat kept their earnings surprises
on a role; over the past year they have exceeded expectations by an
average of over 13%.
Looking Ahead
On the most recent call, Cintas updated their guidance for fiscal
2012. They now expect 2012 revenue to be in the range of $4.09
billion to $4.12 billion with EPS in the range of $2.24 to $2.27.
They offered this guidance with the caveat that there is no further
deterioration in the U.S. Economy.
According to the Zacks Consensus Estimate, expectations are for
Cintas to generate $0.59 in income this quarter. Of the 12
analysts who cover CTAS, the consensus is for the company to grow
earnings by 34% in the current year (FY2012) and roughly 11.4% in
FY2013.
In terms of the magnitude of analyst estimate trends, we are
still seeing all of the consensus estimates higher than they were
90 days ago for the current and next quarters as well as FY2012 and
FY2013. There have been a slew of positive revisions following
the most recent earnings announcement.
The stock is now a Zacks Rank 2 Buy.
Market Performance & Technicals
While the earnings report was good, it turned out to be a "buy on
rumor, sell on news" event, sending shares off 4% from their 52
week high of $40.61 reached just the day prior.
For the first time since December 2011, CTAS closed below its 50
day moving average, which now stands at $38.78. If the stock
can get back above that level, it will once again become
support. For the time being, it seems like a bit of
resistance the stock needs to break through. The 200 day is
quite a bit lower at $33.25.
CTAS has exceeded the S&P 500's performance by 23% in the
past year but has begun to lag in the last 90 days due to its
consolidation and move lower.
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Jared A Levy is the Senior Stock Strategist for Zacks.com.
He is also the Editor in charge of the market-beating
Zacks Whisper Trader Service.
CINTAS CORP (
CTAS
): Free Stock Analysis Report
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