Technology

Why Is Cintas (CTAS) Up 0.6% Since Last Earnings Report?

It has been about a month since the last earnings report for Cintas (CTAS). Shares have added about 0.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cintas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Cintas Q1 Earnings & Revenues Beat, Increase Y/Y

Cintas posted better-than-expected first-quarter fiscal 2020 (ended August 2019) results, with both earnings and revenues surpassing the Zacks Consensus Estimate.

Earnings/Revenues

Net income from continuing operations for the quarter jumped 18% to $250.8 million from $212.5 million in the year-ago quarter. Notably, adjusted earnings came in at $2.32 per share, up 20.2% year over year. Also, the bottom line surpassed the Zacks Consensus Estimate of $2.14.

Revenues increased 6.7% year over year to a record level of $1,811.1 million. The metric also improved 8.3% organically. Moreover, the top line surpassed the consensus estimate of $1,785 million.

Segmental Breakup

The Uniform Rental and Facility Services segment generated revenues worth $1,454.5 million in the fiscal first quarter, up 5.8% year over year. First Aid and Safety Services segment’s top line increased 12.2% to $172.1 million. Aggregate revenues from Other businesses came in at $184.5 million, up 8.8%.

Costs/Margins

Aggregate cost and expenses for the fiscal first quarter were $1,505 million, up 5% year over year. Gross profit margin improved 130 basis points (bps) to 46.9%.

Selling and administrative expenses were up 7.6% year over year to almost $543 million in the reported quarter. Operating margin was 16.9%, up 130 bps.

Balance Sheet/Cash Flow

At the end of the fiscal first quarter, cash and cash equivalents came in at $102.1 million compared with $96.6 million at the end of fourth-quarter fiscal 2019. Total long-term liabilities increased to $3,488.3 million from $3,306.2 million sequentially.

For first three months of fiscal 2020, the company generated $276.9 million cash from operating activities, up 69.9% year over year. Capital expenditures were $64.7 million, up 0.3%.

In the fiscal first quarter, Cintas repurchased common stock worth $256.8 million under its buyback program.

Outlook

Cintas updated revenue guidance for fiscal 2020 (ending May 2020) in the range of $7.28-$7.32 billion from the previous view of $7.24-$7.31 billion. Notably, adjusted earnings view for the fiscal has been raised from $8.30-$8.45 per share to $8.47-$8.57.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Cintas has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise Cintas has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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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.

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