Cintas Corporation CTAS has impressed investors with its recent earnings streak, having surpassed estimates in each of the four trailing quarters. The company’s share price increase reflects its impressive performance, exhibiting investor optimism over the stock. On a year-to-date basis, the company has gained 7.4%, outperforming the industry’s growth of 0.9%.
We believe that its notable traction across markets will drive growth in the upcoming quarters.
Factors to Consider
Going forward, Cintas is likely to gain from effective implementation of enterprise resource planning system, integration of G&K Services assets as well as focus on enhancement of product portfolio and customer base.
Acquisitions have been Cintas' preferred mode of business expansion. In fiscal 2018, the company added five acquired assets to Uniform Rental and Facility Services while three were combined with First Aid and Safety Services, and six in All Other. It's worth mentioning that the company is progressing well on the integration of G&K Services buyout with its Uniform Rental and Facility Services segment. In fact, in four years of acquisition, the G&K Services buyout is predicted to be major source of revenue growth and generate cost synergies of $130-$140 million.
Over the years, Cintas has consistently returned significant cash to shareholders through dividends and share repurchases. Notably, in the first six months of fiscal 2019, the company repurchased common stock worth $447 million under its buyback program. Further, the company increased its annual dividend payments by 26.5% from $1.62 per share to $2.05 in October 2018.
Further, the company’s cash position is impressive, as evident from 26.2% year-over-year increase in cash flow from operating activities in fiscal 2018. For fiscal 2019, it expects to generate strong cash flow.
Zacks Rank & Other Key Picks
The stock currently carries a Zacks Rank #2 (Buy).Some other top-ranked stocks from the same industry are Superior Uniform Group, Inc. SGC, Applied Industrial Technologies, Inc. AIT and Brady Corporation BRC. All these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Superior Uniform Group surpassed estimates thrice in the trailing four quarters, the average positive earnings surprise being 8.23%.
Applied Industrial Technologies surpassed estimates in each of the trailing four quarters, the average positive earnings surprise being 11.67%.
Brady outpaced estimates thrice in the preceding four quarters, the average earnings surprise being 7.04%.
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