Cintas (CTAS) Shares Up 54.3% YTD: What's Driving the Rally?

Shares of Cintas Corporation CTAS have rallied about 54.3% so far this year. Also, the company has outperformed its industry’s rise of 49.6% over the same time frame.

The Zacks Rank #2 (Buy) stock, which has a market cap of roughly $26.5 billion, has impressed investors with its recent earnings streak. It surpassed estimates all through in the four trailing quarters, the average positive surprise being 6.26%.

Let’s analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation.

Growth Drivers

Over time, Cintas has solidified the product portfolio and leveraged business opportunities through acquisition of assets. In this regard, the buyout of G&K Services Inc. (March 2017) is worth mentioning. The deal has helped the company to strengthen its product offerings, expand customer profile, processing capacity and improve customer service. It's worth mentioning that in four years, the G&K Services buyout is predicted to be major source of revenue growth, and is expected to generate cost synergies of $130-$140 million.

Also, the implementation of a new enterprise resource planning system, namely SAP, will improve the efficiency of the company’s business operations. It remains well on track to complete the implementation by the end of the fiscal 2020 (ending May 2020).

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2020 earnings for Cintas has climbed nearly 1.8% over the past 60 days from $8.42 to $8.57. For the fiscal year, eight estimates have been being revised upward in the past couple of months against none downward.

Upbeat Q1 Performance & View

Cintas reported adjusted earnings per share of $2.32 in first-quarter fiscal 2020 (ended August 2019), marking a 20.2% year-over-year rise. Moreover, the figure beat the Zacks Consensus Estimate by 8.41%. This earnings improvement is primarily attributable to healthy organic growth across all its segments.

It predicts adjusted earnings per share of $8.47-$8.57 for fiscal 2020, higher than $8.30-$8.45 predicted earlier.

Other Key Picks

Some other top-ranked stocks from the Zacks Industrial Products sector are Dover Corporation DOV, The Middleby Corporation MIDD and Energous Corporation WATT. All these companies carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dover pulled off average positive surprise of 6.70% in the last four quarters.

Middleby pulled off average positive surprise of 3.03% in the last four quarters.
Energous’ average earnings surprise in the last four quarters was a positive 6.67%.

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