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Why Is Cintas (CTAS) Up 6.4% Since Last Earnings Report?
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It has been about a month since the last earnings report for Cintas (CTAS - Free Report) . Shares have added about 6.4% in that time frame, outperforming 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 Surpasses Q1 Earnings and Sales Estimates
Cintas reported first-quarter fiscal 2023 (ended Aug 31, 2022) earnings of $3.39 per share, beating the Zacks Consensus Estimate of $3.15. The bottom line increased 9% year over year despite high costs.
Total revenues of $2,166.5 million also outperformed the Zacks Consensus Estimate of $2,078.2 million. The top line climbed 14.2% year over year due to higher segmental revenues. Organic sales were up 13.9% year over year.
Segmental Results
The company has two reportable segments Uniform Rental and Facility Services; and First Aid and Safety Services. Other businesses like Uniform Direct Sale and Fire Protection Services are included in All Other. Quarterly sales data is briefly discussed below.
Revenues from the Uniform Rental and Facility Services segment (representing 78.4% of the reported quarter’s net sales) were $1,697.77 million, increasing 12.6% year over year.
Revenues from the First Aid and Safety Services segment (representing 10.8% of the reported quarter’s net sales) totaled $234.16 million, increasing 17.6% year over year.
Revenues from the All Other business (representing 10.8% of the reported quarter’s net sales) were $226.25 million, increasing 23.7% year over year.
Margin Profile
In the quarter under review, Cintas’ cost of sales (comprising costs related to uniform rental and facility services and others) increased 14.5% year over year to $1,138.34 million. It represented 52.5% of net sales. Gross profit increased 13.9% to $1,028.1 million. The gross margin was 47.5%, down from 47.6% in the year-ago quarter. High energy costs played spoilsports in the quarter.
Selling and administrative expenses totaled $587.99 million, reflecting a 15.6% increase from the year-ago figure. It represented 27.1% of net sales. The operating margin (adjusted) in the reported quarter increased 20 basis points to 20.3%. Interest expenses increased 26.8% to $27.72 million.
Balance Sheet and Cash Flow
Exiting the fiscal first quarter, Cintas had cash and cash equivalents of $74.56 million, down 17.6% sequentially. Long-term debt was $2,484.60 million, flat sequentially.
In the fiscal first quarter, CTAS generated net cash of $298.16 million from operating activities, increasing 13.7% from the year-ago period. Capital expenditure totaled $70 million, reflecting a year-over-year increase of 43.6%. Free cash flow increased 6.9% to $228.14 million in the reported quarter.
In first-quarter fiscal 2023, the company repurchased shares worth $320.33 million, down from $659.23 million in the year-ago period. Dividend payments totaled $97.66 million in the fiscal first quarter.
Fiscal 2023 Outlook Improved
Following a strong first-quarter fiscal 2023 performance, Cintas improved its fiscal 2023 outlook. The company now expects revenues of $8.58-$8.67 billion in fiscal 2023 compared with $8.47-$8.58 billion anticipated earlier. Earnings are estimated in the range of $12.30-$12.65 per share compared with $11.90-$12.30 expected earlier.
For fiscal 2023, Cintas expects adjusted operating income between $1.72 billion and $1.76 billion ($1.55 billion reported in fiscal 2022). Adjusted effective tax rate in the period is expected to be approximately 20% compared with 17.9% in fiscal year 2022. The company expects this higher tax rate to impact earnings by around 32 cents. Due to higher interest rates, interest expenses are expected to increase to approximately $110 million in fiscal 2023 from $88.8 million in fiscal 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Cintas has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 looks promising. Notably, Cintas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Cintas (CTAS) Up 6.4% Since Last Earnings Report?
It has been about a month since the last earnings report for Cintas (CTAS - Free Report) . Shares have added about 6.4% in that time frame, outperforming 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 Surpasses Q1 Earnings and Sales Estimates
Cintas reported first-quarter fiscal 2023 (ended Aug 31, 2022) earnings of $3.39 per share, beating the Zacks Consensus Estimate of $3.15. The bottom line increased 9% year over year despite high costs.
Total revenues of $2,166.5 million also outperformed the Zacks Consensus Estimate of $2,078.2 million. The top line climbed 14.2% year over year due to higher segmental revenues. Organic sales were up 13.9% year over year.
Segmental Results
The company has two reportable segments Uniform Rental and Facility Services; and First Aid and Safety Services. Other businesses like Uniform Direct Sale and Fire Protection Services are included in All Other. Quarterly sales data is briefly discussed below.
Revenues from the Uniform Rental and Facility Services segment (representing 78.4% of the reported quarter’s net sales) were $1,697.77 million, increasing 12.6% year over year.
Revenues from the First Aid and Safety Services segment (representing 10.8% of the reported quarter’s net sales) totaled $234.16 million, increasing 17.6% year over year.
Revenues from the All Other business (representing 10.8% of the reported quarter’s net sales) were $226.25 million, increasing 23.7% year over year.
Margin Profile
In the quarter under review, Cintas’ cost of sales (comprising costs related to uniform rental and facility services and others) increased 14.5% year over year to $1,138.34 million. It represented 52.5% of net sales. Gross profit increased 13.9% to $1,028.1 million. The gross margin was 47.5%, down from 47.6% in the year-ago quarter. High energy costs played spoilsports in the quarter.
Selling and administrative expenses totaled $587.99 million, reflecting a 15.6% increase from the year-ago figure. It represented 27.1% of net sales. The operating margin (adjusted) in the reported quarter increased 20 basis points to 20.3%. Interest expenses increased 26.8% to $27.72 million.
Balance Sheet and Cash Flow
Exiting the fiscal first quarter, Cintas had cash and cash equivalents of $74.56 million, down 17.6% sequentially. Long-term debt was $2,484.60 million, flat sequentially.
In the fiscal first quarter, CTAS generated net cash of $298.16 million from operating activities, increasing 13.7% from the year-ago period. Capital expenditure totaled $70 million, reflecting a year-over-year increase of 43.6%. Free cash flow increased 6.9% to $228.14 million in the reported quarter.
In first-quarter fiscal 2023, the company repurchased shares worth $320.33 million, down from $659.23 million in the year-ago period. Dividend payments totaled $97.66 million in the fiscal first quarter.
Fiscal 2023 Outlook Improved
Following a strong first-quarter fiscal 2023 performance, Cintas improved its fiscal 2023 outlook. The company now expects revenues of $8.58-$8.67 billion in fiscal 2023 compared with $8.47-$8.58 billion anticipated earlier. Earnings are estimated in the range of $12.30-$12.65 per share compared with $11.90-$12.30 expected earlier.
For fiscal 2023, Cintas expects adjusted operating income between $1.72 billion and $1.76 billion ($1.55 billion reported in fiscal 2022). Adjusted effective tax rate in the period is expected to be approximately 20% compared with 17.9% in fiscal year 2022. The company expects this higher tax rate to impact earnings by around 32 cents. Due to higher interest rates, interest expenses are expected to increase to approximately $110 million in fiscal 2023 from $88.8 million in fiscal 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
At this time, Cintas has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 looks promising. Notably, Cintas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.