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Cintas (CTAS) Shares Rises 49% YTD: What's Driving the Rally?

Zacks Equity Research

Price performance of Cintas Corporation CTAS has been impressive since the beginning of calendar year 2019, which is evident from 48.6% gain in its shares. Solid financial performances, healthy fundamentals and future growth opportunities supported positive market sentiments for the company.

The Cincinnati, OH-based company belongs to the Zacks Uniform and Related industry, which in turn belongs to the Zacks Industrial Products sector. It currently has a VGM Score of B and a Zacks Rank #3 (Hold). The company’s earnings in the next five years are predicted to rise 10.2%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Year to date, Cintas has outperformed its industry’s growth of 45.9%, the sector’s rise of 13.3% and the S&P 500’s improvement of 18.5%.




Factors Driving the Stock

We believe that so far in 2019, the company’s share price has gained momentum on better-than-expected results for two quarters in a row. Average positive earnings beat for these two quarters, including the third quarter (ended February 2019) and the fourth quarter of fiscal 2019 (ended May 2019) was 7.15%.

Notably, the company’s earnings in the last reported quarter surpassed estimates by 6.7% while sales beat the same by 0.7%. Also, solid organic sales growth in all segments boosted the bottom line on a year-over-year basis.

The company is gaining from its focus on the enhancement of product portfolio, solid customer base and synergistic benefits from acquired assets. In addition, effective implementation of a new enterprise resource planning system, namely SAP, is a boon. In addition, shareholder-friendly policies raise the stock’s attractiveness. Dividend payments and stock buybacks are popular ways of boosting stakeholders’ wealth.

Acquisitive nature of Cintas has been boosting growth opportunities as well. In the third quarter and fourth quarters of fiscal 2019, the company invested approximately $3.2 million on acquisitions. Also, its G&K Services buyout (in March 2017) has been adding value to its Uniform Rental and Facility Services segment. The acquisition may prove to be a major revenue driver going forward. It is also expected to bring in considerable cost synergies.

Moreover, healthy projections for fiscal 2020 (ending May 2020) seem to be sound share price driving factor. For fiscal 2020, Cintas anticipates generating revenues of $7.24-$7.31 billion and earnings per share of $8.30-$8.45. These projections are above the year-ago reported figures of $6.9 billion and $7.60 per share.

Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $8.45 for fiscal 2020 and $9.41 for fiscal 2021 (ending May 2021), reflecting growth of 1.8% and 2.4% from the respective 90-day-ago figures. Such positive revisions in earnings estimates are reflective of positive sentiments for the company.

Cintas Corporation Price and Consensus

 

Cintas Corporation Price and Consensus

Cintas Corporation price-consensus-chart | Cintas Corporation Quote

Cintas’ Performance Versus Three Peers

Cintas has outperformed many peers so far in calendar year 2019. Three such stocks are Unifirst Corporation UNF, Ecolab Inc. ECL and Albany International Corp. AIN, with respective year-to-date gains of 35.3%, 33.1% and 40%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

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Ecolab Inc. (ECL) : Free Stock Analysis Report
 
Cintas Corporation (CTAS) : Free Stock Analysis Report
 
Unifirst Corporation (UNF) : Free Stock Analysis Report
 
Albany International Corporation (AIN) : Free Stock Analysis Report
 
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