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Cintas (CTAS) Tops Q2 Earnings Estimates, Raises FY19 View

Zacks Equity Research

Cintas Corporation CTAS reported better-than-expected second-quarter fiscal 2019 (ended November 2018) results.

Earnings/Revenues

Quarterly adjusted earnings came in at $1.76 per share, up 34.4% year over year. The bottom line also surpassed the Zacks Consensus Estimate of $1.72.

Revenues in the reported quarter improved 7% year over year to $1,718.2 million. The metric also improved 7% year over year organically. Additionally, the top-line numbers surpassed the Zacks Consensus Estimate of $1,695 million.  

Segmental Break-Up

The Uniform Rental and Facility Services segment generated $1,390.8 million revenues in the fiscal second quarter, up 6.3% year over year. The First Aid and Safety Services segment’s top-line performance improved 10.3% year over year to $153.3 million. Aggregate revenues from Other businesses came in at $174.1 million, up 9.3% year over year.

Costs/Margins

Aggregate cost of sales in the fiscal second quarter was $943.1 million, up 6% year over year. Gross profit margin improved 50 basis points (bps) year over year to 45.1% in the fiscal second quarter.

Selling and administrative expenses flared up 5% year over year to $491.7 million in the reported quarter. G&K Services, Inc. (acquired in March 2017) integration expenses tanked 40% year over year to $7.8 million. Operating margin in the reported quarter was 16%, up 140 bps year over year.

Cintas Corporation Price, Consensus and EPS Surprise

 

Cintas Corporation Price, Consensus and EPS Surprise | Cintas Corporation Quote

Balance Sheet/Cash Flow

Exiting the fiscal second quarter, Cintas had cash and cash equivalents of $88.5 million, down from $138.7 million recorded as of May 31, 2018. Long-term debt stood at $2,536.4 million, as against $2,535.3 million recorded at the end of fiscal 2018.

In first-half fiscal 2019, the company generated $344.6 million cash from operating activities, down 9.1% year over year. Capital expenditures were $137.6 million, up 3.9% year over year.

In the six months of fiscal 2019, Cintas repurchased common stock worth $447 million, under its buyback program. Notably, the company’s latest dividend payout of $2.05 per share (Dec 7, 2018) was 26.5% higher than the previous year’s dividend.

Outlook

Cintas is poised to enhance its competency on the basis of the successful G&K Services’ integration and effective implementation of its strategic enterprise resource planning system. This Zacks Rank #2 (Buy) company also remains on track to boost its shareholders’ remuneration over time.

Concurrent with the fiscal second-quarter earnings release, Cintas also raised its revenue guidance for fiscal 2019 (ending May 2019) from $6.80-$6.855 billion to $6.87-$6.91 billion. Also, adjusted earnings view for the fiscal has been raised from $7.19-$7.29 per share to $7.30-$7.38 per share.

G&K Services’ integration expenses are predicted to lie within $18-$22 million in fiscal 2019.

Other Stocks to Consider

Some other top-ranked stocks in the Zacks Industrial Products sector are listed below:

DXP Enterprises, Inc. DXPE sports a Zacks Rank #1 (Strong Buy). The company pulled off a positive average earnings surprise of 112.62% in the past four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Applied Industrial Technologies, Inc. AIT holds a Zacks Rank #2.  The company generated a positive average earnings surprise of 11.67% in the last four quarters.

Enersys ENS also carries a Zacks Rank of 2. The company delivered a positive average earnings surprise of 2.83% in the trailing four quarters.

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