Cintas Retains 'Neutral' - Analyst Blog
June 29 2011 - 7:15AM
Zacks
Cintas Corporation
(CTAS), providing specialized services to businesses of all types
throughout North America retains a 'Neutral' rating. The company
designs, manufactures, implements corporate identity uniform
programs, and provides entrance mats, restroom supplies,
promotional products and first aid and safety products for
approximately 800,000 businesses. Cintas operates under two
operating segments, Rental Uniforms and Ancillary Products and
Other Services.
Cintas in its last reported quarter
delivered an EPS of 41 cents surpassing the Zacks Consensus
Estimate of 36 cents and 32 cents reported during the prior-year
quarter. Cintas’ total revenue increased 8.8% to $937.8 million in
the reported quarter, outperforming the Zacks Consensus Estimate of
$909 million and $861.8 million in the year-earlier quarter. The
improvement in revenue can be attributed to continued momentum in
sales productivity and customer retention.
Cintas pursues an aggressive share
repurchase policy. Although the company did not purchase any shares
during the last quarter, it repurchased $203.2 million worth of
shares in the first six months of the fiscal year. The company is
still authorized to purchase $500 million shares under its new
share repurchase program.
Encouraged by its third quarter
performance, Cintas upgraded its guidance for fiscal 2011. The
company now expects full year revenues in the range of $3.75
billion–$3.77 billion, up from the previous range of $3.55
billion–$3.75 billion. However, there is no change in the EPS
guidance of $1.60–$1.63, as management expects an increase in
gasoline and diesel cost to negatively impact its fourth quarter
results.
Besides, Cintas recently announced
a strategic alliance with Diversey Inc. – a leading global provider
of commercial cleaning, sanitation and hygiene solutions – to
further strengthen its position in the services industry. The
alliance has developed a service called Signet, which combines the
industry-leading green chemicals with the excellent service of
Cintas to provide customers fully integrated management of their
cleaning and hygiene needs.
Cintas has formulated a long-term
strategy in order to maximize revenue growth for all the products
and services it offers by penetrating the existing customer base as
well as entering unexplored markets. For proper implementation of
the strategy, the company has evolved a highly talented team of
professionals that visits customers on a regular basis. This
creates a personal relationship with consumers and enables the
company to introduce new products and services.
However, Cintas’ revenue largely
depends upon the service industry, including hotels, airlines,
restaurants, etc. Any drop in the employment rate has the potential
to adversely impact the company’s profitability. Besides, Cintas
faces competition from national, regional and small local players
that are targeting its markets.
These players at times target the
markets at the expense of margins, thereby negatively affecting
Cintas’ results. Moreover, Cintas draws 70% of revenue from its
core uniform rental segment, which is in the saturation stage.
The company is constantly making
efforts to innovate and focus on its other businesses, including
direct uniform sales, first aid safety, fire protection and
document management. However, in doing so, the additional resources
and time involved in developing these growing segments may threaten
Cintas' profitability. Thus, the reasons above explain the Neutral
recommendation of Cintas.
Cincinnati, Ohio-based Cintas
Corporation designs, manufactures and implements corporate identity
uniform programs, and provides entrance mats, restroom supplies,
promotional products, and first aid and safety products for
approximately 800,000 businesses. Cintas competes with
G&K Services Inc. (GKSR), UniFirst
Corp. (UNF) and privately held Alsco Inc. and ARAMARK
Corporation. Cintas currently retains a Zacks #3 Rank (short-term
Hold rating).
CINTAS CORP (CTAS): Free Stock Analysis Report
G&K SVCS A (GKSR): Free Stock Analysis Report
UNIFIRST CORP (UNF): Free Stock Analysis Report
Zacks Investment Research
Cintas (NASDAQ:CTAS)
Historical Stock Chart
From May 2024 to Jun 2024
Cintas (NASDAQ:CTAS)
Historical Stock Chart
From Jun 2023 to Jun 2024