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Cintas (CTAS) to Report Q2 Earnings: Beat in the Cards?

Zacks Equity Research

Cintas Corporation CTAS is slated to report second-quarter fiscal 2020 (ended November 2019) results on Dec 17, after market close.

The company pulled off average positive earnings surprise of 6.26% in the preceding four quarters. In the fiscal first quarter (ended August 2019), Cintas reported adjusted earnings of $2.32 per share, which surpassed the Zacks Consensus Estimate of $2.14 by 8.4%.

Year to date, the company’s shares have rallied 54.3% compared with the industry’s rise of 51.1%.



Factors at Play

Cintas is likely to have benefited from strength in its Uniform Rental and Facility Services and First Aid and Safety Services segments during the fiscal second quarter. Its Uniform Rental and Facility Services’ sales jumped 5.8% in the fiscal first quarter on a year-over- year basis, a trend that most likely continued in the fiscal second quarter owing to solid demand for products and services. First Aid and Safety Services is likely to have performed well in the fiscal second quarter on account of strong demand for first aid and safety products. Further, the company’s focus on enhancing its product portfolio and improving and customer base is likely have boosted growth.

Also, the acquisition of G&K Services Inc. (closed in March 2017), which has strengthened product portfolio and processing capacity as well as improved customer service, is likely to have augmented fiscal second-quarter revenues. In addition, benefits from the implementation of enterprise resource planning system, investment in technology and the company’s focus on enhancement of product portfolio are likely to get reflected in Cintas’ upcoming results.

Amid this backdrop, the Zacks Consensus Estimate for fiscal second-quarter revenues for Uniform Rental and Facility Services is currently pegged at $1,475 million, indicating growth of 6% from the year-ago reported figure. Revenues for First Aid and Safety Services are anticipated to be strong, with estimates pegged at $166 million, implying an increase of 8.5% year over year. In addition, the consensus estimate for revenues for All Other, under which uniform direct sale and fire protection services businesses are included, currently stands at $182 million, suggesting growth of 4.6%.

However, escalating cost of sales and expenses are a major concern for Cintas. For instance, in fourth-quarter fiscal 2019 (ended May 2019) and first-quarter fiscal 2020, its aggregate cost and expenses jumped 5.4% and 5%, respectively, on a year-over-year basis. The company continues to experience cost pressure in certain areas that include rising wages and enterprise resource planning system implementation.

Why a Likely Positive Surprise

Our proven model predicts an earnings beat for Cintas this time around. The combination a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Cintas has an Earnings ESP of +2.02% as the Most Accurate Estimate is pegged at $2.08, higher than the Zacks Consensus Estimate of $2.04.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Cintas Corporation Price and EPS Surprise

Cintas Corporation Price and EPS Surprise

Cintas Corporation price-eps-surprise | Cintas Corporation Quote

Zacks Rank: The company carries a Zacks Rank #3.

Other Key Picks

Here are some other companies you may want to consider as our model shows that these have the right mix of elements to beat estimates:

AGCO Corporation AGCO has an Earnings ESP of +2.85% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Colfax Corporation CFX has an Earnings ESP of +15.01% and a Zacks Rank of 3.

Fortune Brands Home & Security, Inc. FBHS has an Earnings ESP of +3.82% and a Zacks Rank #3.

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