NEW YORK (AP) -- Shares of Cintas Corp. fell Wednesday after the uniform supplier reported lower-than-expected fiscal-third quarter net income and trimmed the high-end of earnings-per-share forecast for the fiscal year.
THE SPARK: The Cincinnati company reported its fiscal third-quarter results after the market closed Tuesday. Cintas said its net income fell 2 percent over the three months ended Feb. 28, to $74.7 million, or 60 cents per share. Revenue grew 6 percent to $1.08 billion.
Analysts were forecasting net income of 62 cents per share on $1.06 billion in revenue, according to FactSet.
THE BIG PICTURE: Cintas said its costs associated with employee medical benefits increased, and so did expenses related to auto insurance and other liabilities. The company says rental material costs have gone up, and it is adding new delivery capacity to handle strengthening demand after several years without significant new hiring. That also translates to new expenses.
Cintas now expects net income of $2.50 to $2.54 per share for the fiscal year, and it forecasts revenue of $4.3 billion to $4.33 billion. Previously it said net income would be between $2.50 and $2.58 per share and revenue would be between $4.28 billion and $4.33 billion.
Analysts expect income of $2.55 per share and revenue of $4.29 billion on average.
THE ANALYSIS: KeyBanc Capital Markets analyst Joe Box said some of the costs that affected Cintas' business in the third quarter will decrease, but the need to add delivery capacity could hurt its profit margins for some time. Box maintained a "Hold" rating on Cintas' stock and said he is waiting for more evidence that Cintas' customers are hiring more workers.
SHARE ACTION: Shares of Cintas lost $3.12, or 6.8 percent, to $42.81 in afternoon trading. As of Tuesday's closing price, the stock had advanced about 65 percent over the last two years.
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