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Cintas (CTAS) to Report Q2 Earnings: What's in the Cards?

Cintas Corporation CTAS is slated to report second-quarter fiscal 2019 (ended November 2018) results on Dec 20, after the market closes.

The company pulled off a positive average earnings surprise of 7.22% over the preceding four quarters. Notably, Cintas’ first-quarter fiscal 2019 (ended August 2018) adjusted earnings of $1.93 per share outpaced the Zacks Consensus Estimate of $1.78 per share by 8.4%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Cintas believes efforts undertaken to enhance its product portfolio and improve customer relationships will drive the company’s organic revenue growth in the upcoming quarters of fiscal 2019 (ending May 2019). Additionally, strength in the National Account, Fire and Uniform Direct Sale businesses will likely support the upswing, moving ahead. The company also expects that the recently-made business acquisitions will support its top-line growth in the quarters ahead. 

The Zacks Consensus Estimate for revenue of the company’s Uniform Rental and Facility Services, First Aid and Safety Services and All Other business segments are currently pegged at $1,380 million, $151 million and $166 million for second-quarter fiscal 2019, higher than the respective tallies of $1,308 million, $139 million and $159 million recorded in the year-ago quarter.

Cintas anticipates that stellar revenues, lower commission expense (on account of Accounting Standard Update 2014-09 adoption), and reduced corporate tax expenses (due to the implementation of December 2017 Tax Cuts and Jobs Act) will strengthen its profitability in the near term.

The Zacks Consensus Estimate for gross profit in second-quarter fiscal 2019 for Uniform Rental and Facility Services, First Aid and Safety Services and All Other business segments are currently pegged at $621 million, $72 million and $71 million, higher than the respective tallies of $584 million, $65 million and $67 million recorded in the prior-year period.

However, rising stock-based compensation expenses (associated with the change in retirement policy), integration expenses related to G&K Services Inc. acquisition (March 2017) and cost relating to the implementation of new enterprise resource planning system might hurt Cintas’ margins in quarters-to-be-reported. Moreover, material cost inflation (due to tariffs levied over U.S. imports) and soaring wage costs might weigh over the company’s near-term profitability.

Earnings Whispers

Our proven model provides some idea on the stocks that are about to release their earnings results. Per the model, a stock needs to have a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

That is not the case here as we will see below.

Esrnings ESP: Cintas has an Earnings ESP of 0.00%. This is because the Zacks Consensus Estimate for the company’s earnings for the fiscal second quarter is in line with the Most Accurate Estimate of $1.72 per share.

Cintas Corporation Price and EPS Surprise

 

Cintas Corporation Price and EPS Surprise | Cintas Corporation Quote

Zacks Rank: Cintas’ favorable Zacks Rank #2, when combined with an Earnings ESP of 0.00%, makes surprise predictions inconclusive.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks in the Zacks Industrial Products sectorthat you may want to consider, as our model shows that these have the right combination of elements to come up with an earnings beat:

Flowserve Corporation FLS has a Zacks Rank #2 and an Earnings ESP of +2.85%. You can see the complete list of today’s Zacks #1 Rank stocks here.

HD Supply Holdings, Inc. HDS has a Zacks Rank #2 and an Earnings ESP of +1.57%.

Donaldson Company, Inc. DCI has a Zacks Rank #3 and an Earnings ESP of +0.49%.

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Cintas Corporation (CTAS) : Free Stock Analysis Report
 
Flowserve Corporation (FLS) : Free Stock Analysis Report
 
Donaldson Company, Inc. (DCI) : Free Stock Analysis Report
 
HD Supply Holdings, Inc. (HDS) : Free Stock Analysis Report
 
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