) reported first quarter fiscal 2014 (ended Aug 31, 2013) net
income of $77.8 million or 63 cents per share compared with $76.7
million or 60 cents per share in the year-earlier quarter. While
absolute earnings increased 1.3% year over year, it increased
5.0% on a per share basis. However, the reported earnings missed
the Zacks Consensus Estimate by a penny.
CINTAS CORP (CTAS): Free Stock Analysis
FED SIGNAL CP (FSS): Free Stock Analysis
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Total quarterly revenue increased 6.6% year over year to $1.12
billion, slightly ahead of the Zacks Consensus Estimate of $1.11
billion. Taking into account the effect of one less workday in
the reported quarter compared with prior-year, total revenue
improved 8.2% year over year.
Organic growth (adjusted for the impact of acquisitions and one
less workday) was 7.1% with a strong execution of operational
plans, stringent cost-control measures and improvement in
efficiency levels. Each of the four operating segments reported
organic growth of over 6%.
Operating income in the reported quarter climbed 0.6% to $140.1
million. Operating margin was 12.5% in first quarter fiscal 2014
compared with 13.2% in the year-ago quarter due to adverse
effects of one less workday, added route capacity and lower
recycled paper prices.
Rental Uniforms and Ancillary Products
revenues for the quarter improved 5% year over year to $792.9
million, accounting for 71% of the total company revenue. Organic
growth of the segment was 6.7%. Gross margin decreased to 42.6%
from 43.3% in the year-ago quarter due to the adverse effect of
higher material and service costs associated with added route
Uniform Direct Sales
were $107.5 million (up 7.2% year over year) and accounted for
10% of the company's revenues. Gross margin decreased to 27.7%
from 29.4% in the year-ago quarter.
First Aid, Safety and Fire Protection Services
revenues climbed 13.6% to $125.9 million, representing 11% of the
company's total revenue. Gross margin improved 50 bps year over
year to 43.1% by leveraging infrastructure facilities for an
improved mix of higher-margin sale items.
Document Management Services
segment increased 10.3% year over year to $94.1 million,
accounting for 8% of the total company revenue. Gross margin for
the segment was 45.9%, down from prior-year tally of 49.1%.
Cintas has a solid financial position with adequate liquidity.
Cash and cash equivalents were $278.7 million at quarter-end.
Long-term debt was $1.31 billion as of Aug 31, 2013. Cash flow
from operations was $82.6 million for the reported quarter
compared with $94.9 million in the year-ago period. Free cash
flow decreased to $45.1 million in the quarter from $47.4 million
in the year-earlier quarter.
During the reported quarter, Cintas purchased 2.1 million shares
for $100.7 million as part of its share repurchase program.
Subsequent to the quarter-end, the company purchased 0.9 million
shares for approximately $46.3 million. The share buyback is
likely to positively benefit fiscal year 2014 earnings by
approximately 4 cents per share. As of Sep 19, 2013, Cintas had
$15.4 million worth of shares available to purchase under the Oct
2011 share buyback program and $500.0 million under the Jul 2013
Fiscal 2014 Outlook
For fiscal 2014, Cintas reiterated its revenue guidance in the
range of $4.5 billion-$4.6 billion with continued softness in the
market due to several factors including the Affordable Care Act.
However, keeping in view its share repurchases, earnings guidance
were increased from its earlier range of $2.66-$2.75 to
$2.70-$2.79 per share.
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, albeit at a moderate pace. We also remain encouraged about
the relatively strong quarterly and fiscal performances of the
Cintas presently has a Zacks Rank #3 (Hold). Other notable
companies in the industry include
LSB Industries Inc.
Federal Signal Corp.
), each carrying a Zacks Rank #2 (Buy).