Markets

Cintas Shows Promise on Accretive Buyout and Bullish View

On Sep 30, Zacks Investment Research updated the research report on business services provider Cintas CorporationCTAS .

Cintas started fiscal 2016 on a strong note by recording solid first-quarter results on the back of healthy top-line growth. The company reported first-quarter fiscal 2016 (ended Aug 31, 2015) net income of $106.2 million or 93 cents per share compared with $105.9 million or 89 cents per share in the year-earlier quarter. The reported earnings for the quarter comfortably beat the Zacks Consensus Estimate by 3 cents.

Quarterly revenues increased 8.8% year over year to $1,198.9 million and exceeded the Zacks Consensus Estimate of $1,174 million. Organic growth for the reported quarter was healthy at 6.8%. The superior top-line performance was primarily attributable to the addition of newer customers and higher penetration of existing customers through better and innovative products and services.

Cintas aims to continually achieve revenue build-up by increasing penetration levels at existing customers and broadening customer base to include business segments that are not historically served. The company also identifies additional product and service opportunities for its current and future customers to expand its product portfolio and ensure solid organic revenue growth. For augmenting its long-term margins, Cintas is focusing more on its core competency areas by expanding its businesses across key regions. Additionally, the company's newly-introduced customized product range is successfully catering to the needs of its clients.

During the quarter, Cintas acquired ZEE Medical -- a van-based provider of occupational first aid and safety products, training and services, for approximately $134 million in cash. The strategic move by the company was aimed to expand its presence in North America in the first aid, safety, training and emergency products. This acquisition is expected to be accretive to future earnings and also likely to generate annual revenues of $110 million to $120 million. With this acquisition, the company identifies additional product and service opportunities for its current and future customers to expand its geographical footprint.

Consequently, Cintas revised its guidance and expects fiscal 2016 revenues in the range of $4.80 billion to $4.88 billion, up 7.2%-9% year over year. Earnings from continuing operations are expected to be within $3.79-$3.88 per share, which represents a year-over-year improvement of 13.1%-15.8%.

Over the years, the company has consistently returned significant cash to its shareholders through dividends and share repurchases. The company's investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach to focus on the relative value of the various sectors within the broader industry. We remain encouraged by such focused attempts of the company to maintain a steady growth curve.

Cintas currently has a Zacks Rank #2 (Buy). Some other stocks in the broader industry include FTI Consulting, Inc. FCN , The Hackett Group, Inc. HCKT and Lionbridge Technologies Inc. LIOX , each carrying the same Zacks Rank as Cintas.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

CINTAS CORP (CTAS): Free Stock Analysis Report

FTI CONSULTING (FCN): Free Stock Analysis Report

LIONBRIDGE TECH (LIOX): Free Stock Analysis Report

HACKETT GROUP (HCKT): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

HCKT CTAS FCN

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More