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Cintas (CTAS) Surpasses Q3 Earnings and Sales Estimates

Cintas Corporation CTAS reported better-than-expected third-quarter fiscal 2022 (ended Feb, 2022) results. Its earnings surpassed the Zacks Consensus Estimate by 8.9%.

The company’s adjusted earnings in the reported quarter were $2.69 per share, surpassing the Zacks Consensus Estimate of $2.47. On a year-over-year basis, the bottom line increased 13.5% from the year-ago figure of $2.37. The impacts of the sales increase were partially offset by higher costs and expenses.

Revenue Details

In the quarter under review, Cintas’s net sales were $1,960.5 million, reflecting growth of 10.3% from the year-ago quarter. Organic sales were up 10% year over year. The top line surpassed the Zacks Consensus Estimate by 3%.

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 79.2% of the reported quarter’s net sales) were $1,553.3 million, increasing 9.6% year over year.

Revenues from the First Aid and Safety Services segment (representing 10.9% of the reported quarter’s net sales) totaled $213 million, increasing 7.3% year over year.

Revenues from the All Other business (representing 9.9% of the reported quarter’s net sales) were $194.3 million, increasing 20.8% year over year.

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

Margin Profile

In the quarter under review, Cintas’ cost of sales (comprising costs related to uniform rental and facility services and others) increased 9.8% year over year to $1,062.4 million. It represented 54.2% of net sales. Gross profit increased 10.9% to $898.1 million. The gross margin was 45.8%, up from 45.6% in the year-ago quarter. High labor and energy expenses played spoilsports in the quarter.

Selling and administrative expenses totaled $490.5 million, reflecting a 1.6% increase from the year-ago figure. It represented 25% of net sales. The operating margin (adjusted) in the reported quarter was 19.3%. Interest expenses decreased 10.3% to $22 million.

Balance Sheet and Cash Flow

Exiting the fiscal third quarter, Cintas had cash and cash equivalents of $84.1 million, down 25.7% from $113.2 million at the end of the previous quarter. Long-term debt was $1,343.5 million, stable sequentially.

In the first nine months of fiscal 2022, the company repaid debts of $250 million.

In the first nine months of fiscal 2022, it generated net cash of $987.1 million from operating activities, increasing 9.1% from the year-ago period. Capital expenditure totaled $165.9 million, reflecting a year-over-year increase of 65.2%. Free cash flow increased 2.1% to $821.2 million.

In the first nine months of the fiscal year, the company repurchased shares worth $1,221.8 million, up from $154.5 million used in the year-ago period. Dividend payments totaled $276.9 million in the first nine of this fiscal year.

Outlook

For the fiscal fourth quarter (ending May 2022), Cintas anticipates revenues of $1.96-$2.02 billion. The company expects earnings per share of $2.54-$2.74.

The tax rate for the fourth quarter of fiscal 2022 is expected to be 23.2%, indicating an increase from 19.4% recorded a year ago. High taxes are likely to adversely impact earnings by 14 cents per share and affect year-over-year earnings growth by 560 basis points.

Zacks Rank & Stocks to Consider

Cintas currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Industrial Products sector are discussed below.

Lincoln Electric Holdings, Inc. LECO presently carries a Zacks Rank #2 (Buy). The company delivered a four-quarter earnings surprise of 8.9%, on average.

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

The earnings estimates Lincoln have increased 2% for 2022 in the past 60 days. Its shares have jumped 0.2% in the past six months.

Wrap Technologies, Inc. WRAP presently has a Zacks Rank #2. Its earnings surprise in the last reported quarter was 13.33%.

In the past 60 days, Wrap’s earnings estimates have increased 8.5% for 2022 in the past 60 days. Wrap’s shares have declined 58.6% in the past six months.

Ferguson plc FERG presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 14.2%, on average.

In the past 60 days, Ferguson’s earnings estimates have increased 5.9% for fiscal 2022 (ending July 2022). FERG’s shares have gained 0.9% in the past six months.


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