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Cintas (CTAS) Tops Q2 Earnings Estimates, Raises FY19 View

Cintas CorporationCTAS reported better-than-expected second-quarter fiscal 2019 (ended November 2018) results.

Earnings/Revenues

Quarterly adjusted earnings came in at $1.76 per share, up 34.4% year over year. The bottom line also surpassed the Zacks Consensus Estimate of $1.72.

Revenues in the reported quarter improved 7% year over year to $1,718.2 million. The metric also improved 7% year over year organically. Additionally, the top-line numbers surpassed the Zacks Consensus Estimate of $1,695 million.

Segmental Break-Up

The Uniform Rental and Facility Services segment generated $1,390.8 million revenues in the fiscal second quarter, up 6.3% year over year. The First Aid and Safety Services segment's top-line performance improved 10.3% year over year to $153.3 million. Aggregate revenues from Other businesses came in at $174.1 million, up 9.3% year over year.

Costs/Margins

Aggregate cost of sales in the fiscal second quarter was $943.1 million, up 6% year over year. Gross profit margin improved 50 basis points (bps) year over year to 45.1% in the fiscal second quarter.

Selling and administrative expenses flared up 5% year over year to $491.7 million in the reported quarter. G&K Services, Inc. (acquired in March 2017) integration expenses tanked 40% year over year to $7.8 million. Operating margin in the reported quarter was 16%, up 140 bps year over year.

Cintas Corporation Price, Consensus and EPS Surprise

Cintas Corporation Price, Consensus and EPS Surprise | Cintas Corporation Quote

Balance Sheet/Cash Flow

Exiting the fiscal second quarter, Cintas had cash and cash equivalents of $88.5 million, down from $138.7 million recorded as of May 31, 2018. Long-term debt stood at $2,536.4 million, as against $2,535.3 million recorded at the end of fiscal 2018.

In first-half fiscal 2019, the company generated $344.6 million cash from operating activities, down 9.1% year over year. Capital expenditures were $137.6 million, up 3.9% year over year.

In the six months of fiscal 2019, Cintas repurchased common stock worth $447 million, under its buyback program. Notably, the company's latest dividend payout of $2.05 per share (Dec 7, 2018) was 26.5% higher than the previous year's dividend.

Outlook

Cintas is poised to enhance its competency on the basis of the successful G&K Services' integration and effective implementation of its strategic enterprise resource planning system. This Zacks Rank #2 (Buy) company also remains on track to boost its shareholders' remuneration over time.

Concurrent with the fiscal second-quarter earnings release, Cintas also raised its revenue guidance for fiscal 2019 (ending May 2019) from $6.80-$6.855 billion to $6.87-$6.91 billion. Also, adjusted earnings view for the fiscal has been raised from $7.19-$7.29 per share to $7.30-$7.38 per share.

G&K Services' integration expenses are predicted to lie within $18-$22 million in fiscal 2019.

Other Stocks to Consider

Some other top-ranked stocks in the Zacks Industrial Products sector are listed below:

DXP Enterprises, Inc. DXPE sports a Zacks Rank #1 (Strong Buy). The company pulled off a positive average earnings surprise of 112.62% in the past four quarters. You can see the complete list of today's Zacks #1 Rank stocks here.

Applied Industrial Technologies, Inc. AIT holds a Zacks Rank #2. The company generated a positive average earnings surprise of 11.67% in the last four quarters.

Enersys ENS also carries a Zacks Rank of 2. The company delivered a positive average earnings surprise of 2.83% in the trailing four quarters.

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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 Nasdaq, Inc.


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

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