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Cintas (CTAS) Q4 Earnings & Sales Beat Estimates, Fall Y/Y

Zacks Equity Research

Cintas Corporation CTAS has kept its earnings streak alive in the fourth quarter of fiscal 2020 (ended May 31, 2020). It recorded an earnings beat of 9.8% and a sales beat of 4.1% in the quarter under review.

The company’s earnings in the reported quarter were $1.35 per share, surpassing the Zacks Consensus Estimate of $1.23. On a year-over-year basis, the bottom line decreased 34.8% from the year-ago figure of $2.07 on weak sales and a fall in the margin.

For fiscal 2020, the company’s earnings were $8.11 per share, surpassing the Zacks Consensus Estimate of $7.98. Also, the bottom line expanded 6.7% year over year.

Revenue Details

In the quarter under review, Cintas’ net sales were $1,619.6 million, reflecting a decline of 9.7% from the year-ago quarter. Organic sales in the quarter decreased 8.4% year over year. The pandemic played a spoilsport in the quarter.

Further, the top line surpassed the Zacks Consensus Estimate of $1,556 million.

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 78.5% of the reported quarter’s net sales) were $1,271 million, decreasing 11% year over year. Organic sales in the quarter decreased 9.6%.

Revenues from the First Aid and Safety Services segment (representing 12.1% of the reported quarter’s net sales) totaled $196.3 million, increasing 20% year over year. Organic sales in the quarter increased 21.9%.

Revenues from the All Other business (representing 9.4% of the reported quarter’s net sales) were $152.3 million, decreasing 24.5% year over year.

For fiscal 2020, the company’s net sales were $7.085 billion, surpassing the Zacks Consensus Estimate of $7.02 billion. On a year-over-year basis, net sales increased 2.8%.

Margin Profile

In the quarter under review, Cintas’ cost of sales (comprising costs related to uniform rental and facility services as well as others) decreased 6% year over year to $911.8 million. It represented 56.3% of net sales compared with 54.1% in the year-ago quarter. Gross profit in the quarter decreased 14.1% year over year to $707.8 million. Gross margin decreased 220 basis points (bps) year over year to 43.7%.

Selling and administrative expenses totaled $500.4 million, reflecting a 1.5% decline from the year-ago figure. It represented 30.9% of net sales. Operating margin in the quarter decreased 470 bps year over year to 12.8%.

Balance Sheet and Cash Flow

Exiting the quarter, Cintas’ cash and cash equivalents were $145.4 million, down 38% from $234.4 million at the end of the previous quarter. Long-term debt remained more or less unchanged sequentially at $2,539.7 million.

In fiscal 2020, the company generated net cash of $1,291.5 million from operating activities, increasing 20.9% from the previous year. Capital expenditure totaled $230.3 million, reflecting a year-over-year decline of 16.8%. Free cash flow increased 34.1% year over year to $1,061.2 million.

During fiscal 2020, the company repurchased shares worth $464.5 million and paid out dividends totaling $268 million.

Outlook

The company is wary about the uncertainties related to the coronavirus outbreak. It refrained from providing any projections for fiscal 2021 (ending May 2021).

However, the company provided projections for the first quarter. It anticipates revenues of $1.675-$1.700 billion for the quarter, while earnings are expected to be $2.00-$2.20 per share.

The projections for both revenues and earnings suggest improvements from that reported in the fourth quarter of fiscal 2020.

Cintas Corporation Price, Consensus and EPS Surprise

 

Cintas Corporation Price, Consensus and EPS Surprise
Cintas Corporation Price, Consensus and EPS Surprise

Cintas Corporation price-consensus-eps-surprise-chart | Cintas Corporation Quote

Zacks Rank & Other Stocks to Consider

With a market capitalization of $29.6 billion, Cintas currently carries a Zacks Rank #2 (Buy).

Three other top-ranked stocks in the Zacks Industrial Products sector are Altra Industrial Motion Corp. AIMC, The Middleby Corporation MIDD and IDEX Corporation IEX. All these companies currently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past 60 days, earnings estimates for these companies have improved for the current year. Further, positive earnings surprise for the last reported quarter was 47.73% for Altra Industrial, 12.31% for Middleby and 3.10% for IDEX.

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