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Cintas (CTAS) to Gain From Solid Product Portfolio, Buyouts

Zacks Equity Research

On Sep 27, we issued an updated research report on Cintas Corporation CTAS.

In the past three months, this Zacks Rank #2 (Buy) stock has yielded a return of 13% compared with the industry’s growth of 11.1%.



Existing Scenario

Cintas is set to benefit from its focus on enhancement of product portfolio, customer base and investment in technology. In addition, the company believes that the implementation of a new enterprise resource planning system, namely SAP, will improve efficiency of its business operations. For fiscal 2020 (ending May 2020), it currently anticipates generating revenues in the range of $7.28-$7.32 billion compared with the previously estimated $7.24-$7.31 billion.

Also, the company has been steadily strengthening business through acquisitions. In this regard, it acquired assets worth approximately $9.8 million and $3.9 million (net of cash acquired) in fiscal 2019 (ended May 2019) and first-quarter fiscal 2020 (ended August 2019), respectively. Notably, its buyout of G&K Services Inc. (March 2017) is worth mentioning. The deal has been adding value to its Uniform Rental and Facility Services segment. Going forward, the buyout is likely to be a major revenue booster and bring in significant cost synergies.

Cintas remains highly committed toward increasing shareholder wealth through share repurchase and dividend payments. Notably, in first-quarter fiscal 2020, the company repurchased common stock worth $256.8 million, higher than $139.5 million a year ago. Further, it increased annual dividend payments by 26.5% from $1.62 per share to $2.05 in October 2018. Such diligent capital deployment strategies will work in its favor.

In addition, the company’s cash position remains impressive as evident from a 69.9% year-over-year increase in cash flow from operating activities in the fiscal first quarter. For fiscal 2020, the company expects to continue generating strong cash flow. All these factors bode well for Cintas.

Other Key Picks

Some other top-ranked stocks from the Zacks Industrial Products sector are Zebra Technologies Corporation ZBRA, Brady Corporation BRC and Lakeland Industries, Inc. LAKE. While Zebra Technologies currently sports a Zacks Rank #1 (Strong Buy), Brady and Lakeland Industries carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zebra Technologies delivered average positive surprise of 5.61% in the trailing four quarters.

Brady came up with average beat of 9.68% in the preceding four quarters.

Lakeland Industries pulled off average positive surprise of 325.89% in the last four quarters.

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