Cintas Corporation CTAS is slated to report fourth-quarter fiscal 2019 (ended May 2019) results on Jul 16, after market close.
The company pulled off average positive earnings surprise of 6.09% in the preceding four quarters. In the fiscal third quarter (ended February 2019), Cintas reported adjusted earnings of $1.84 per share, which surpassed the Zacks Consensus Estimate of $1.71 by 7.6%.
Let’s see how things are shaping up for this quarter.
Factors at Play
Cintas is likely to continue benefiting from the strong momentum in its Uniform Rental and Facility Services segment. Also, strength in the company’s national account and fire protection services businesses is likely to be conducive to its top line in the fiscal fourth quarter. In addition, the company’s focus on enhancing its product portfolio and improving customer relationships will stoke growth.
Also, effective implementation of enterprise resource planning system and integration of G&K Services assets (acquired in March 2017) will be advantageous. Notably, the company’s recent business acquisitions have strengthened its product portfolio and processing capacity. As a matter of fact, these benefits are likely to get reflected in Cintas’ upcoming quarterly results.
Notably, the Zacks Consensus Estimate for fiscal fourth-quarter revenues in the Uniform Rental and Facility Services segment is currently pegged at $1,431 million, indicating growth of 6.6% from the year-ago reported figure. Moreover, revenues in the First Aid and Safety Services segment are anticipated to be strong, with estimates pegged at $161 million, higher than $148 million reported a year ago. In addition, the consensus estimate for revenues in the All Other segment, under which uniform direct sale and fire protection services businesses are included, currently stand at $189 million, suggesting growth of 5.6%.
However, escalating cost of sales and expenses are a major concern for Cintas. For instance, in second-quarter and third-quarter fiscal 2019, the company’s total cost of sales jumped 6% and 4.3%, respectively, on a year-over-year basis. Cintas continues to experience cost pressure in certain areas that include rising wages, costs related to hangers and enterprise resource planning system implementation. Moreover, costs associated with the G&K Services buyout integration (estimated to be approximately $16 million for fiscal 2019) as well as that incurred for the implementation of enterprise resource planning system, will likely hurt fiscal fourth-quarter margins.
Our proven model provides some idea on the stocks that are about to release 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) to beat estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The case with Cintas is given below:
Earnings ESP: Cintas has an Earnings ESP of 0.00% as the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.94.
Cintas Corporation Price and EPS Surprise
Cintas Corporation price-eps-surprise | Cintas Corporation Quote
Zacks Rank: Cintas carries a Zacks Rank #3, which increases the predictive power of ESP. However, its 0.00% ESP makes surprise prediction difficult.
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.
Here are some companies you may want to consider as our model shows that these have the right combination of elements to beat estimates:
Roper Technologies, Inc. ROP has an Earnings ESP of +0.22% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ingersoll-Rand plc IR is a Zacks Rank #2 stock and has an Earnings ESP of +1.07%.
Axon Enterprise, Inc AAXN carries a Zacks Rank #3 and has an Earnings ESP of +10.96%.
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