Key Reasons to Hold on to the Cintas (CTAS) Stock for Now
Cintas Corporation CTAS is benefiting from strength across its businesses. Increased capacity of several customers' businesses is aiding the Uniform Rental and Facility Services segment, revenues from which rose 9.4% year over year in fiscal 2022. Strength across the first aid cabinet service business is boosting the First Aid and Safety Services segment’s performance. Revenues from the segment climbed 6.1% in fiscal 2022.
With continued growth across its segments, CTAS expects revenues to increase to $8.47$8.58 billion in fiscal 2023 from $7.85 billion reported in fiscal 2022. The company expects earnings per share of $11.90-$12.30 in the current fiscal year compared with $11.28 in fiscal 2022. Adjusted operating income is expected to be $1.68 billion-$1.73 billion in fiscal 2023 compared with $1.55 billion reported in fiscal 2022.
Cintas’ focus on enhancing its product portfolio and investing in technology and existing facilities should continue to drive growth. Also, its focus on operational execution, cost-control measures and pricing actions are supporting its margin performance. In fourth-quarter fiscal 2022, the operating margin improved to 19.5% from 19.4% in the year-ago period despite significant inflationary pressure from high raw material costs.
The company’s consistent measures to reward its shareholders through dividends and share buybacks hold promise. In fiscal 2022, the company repurchased shares worth $1.53 billion, up from $554.12 million in the year-ago period. Dividend payments totaled $375.12 million in fiscal 2022. Owing to the strong performance in fiscal 2022, the company hiked its quarterly dividend by 21.1% to $1.15 per share in July 2022.
Cintas has consistently raised its dividend for 39 years. In addition to the dividend hike, the company’s board also approved a new share buyback program, authorizing the company to buy back up to $1 billion worth of shares. This is in addition to the exciting buyback program, under which $0.5 billion worth of shares is yet to be purchased.
Amid these positives, shares of Cintas have gained 15% in the past six months, outperforming the industry’s 14% increase.
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Gradual easing of supply-chain constraints and continued increase in industrial production should drive the growth of this Zacks Rank #3 (Hold) company.
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Lindsay has an estimated earnings growth rate of 45% for the current year. Shares of the company have rallied 12% in the past six months.
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Valmont Industries VMI presently carries a Zacks Rank #2. VMI pulled off a trailing four-quarter earnings surprise of 13.7%, on average.
Valmont Industries has an estimated earnings growth rate of 26.9% for the current year. Shares of the company have gained 26% in the past six months.
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