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Can Cintas (CTAS) Beat Earnings Estimate Yet Again in Q4?
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Leading business service provider Cintas Corporation (CTAS - Free Report) is scheduled to report fourth-quarter fiscal 2016 results after the closing bell on Jul 19. In the last reported quarter, earnings comfortably exceeded the Zacks Consensus Estimate by 10 cents. Cintas has beaten earnings estimates in each of the last four quarters with an average positive earnings surprise of 4.5%. Let’s see how things are shaping up for this announcement.
Key Factors in the Fourth Quarter
Cintas is expected to achieve broad-based revenue growth in the quarter with the continued improvements in the pricing environment and higher operational efficiency. The company aims to continually achieve revenue buildup by increasing the existing customer penetration level and broadening the customer base to include business segments that are not historically served. The company is expected to capitalize on the growth prospects in the rental first aid and direct sale businesses. Leveraging its well-equipped infrastructure resources, Cintas is also expected to capitalize on its scale advantages to augment competitiveness. Furthermore, a more favorable pricing scenario and cost-streamlining initiatives are expected to drive incremental margins.
During the quarter, Cintas collaborated with Google’s Advanced Technology and Projects Group to explore the opportunities to upgrade Jacquard – a smart garment technology developed by the latter. Jacquard enables conductive fibers to be woven into textiles, connecting interactive apparel wirelessly to devices, software platforms, and cloud services. The collaboration aims to develop Jacquard-enhanced uniforms likely to be promoted by Cintas in the future. Although the collaboration is not likely to make any significant contribution in the soon-to-be-reported quarter, its impact on attracting potential revenue contribution from other clients is irrefutable.
In addition, Cintas has a strong balance sheet with adequate liquidity to meet its working capital requirements. The company also generates strong operating cash flow, which helps maintain its cash reserves. The company has consistently returned cash to its shareholders through stable dividend payouts and share repurchases. In addition, Cintas has easy access to commercial paper and long-term debt markets on favorable interest rate and other terms, which has historically provided it with adequate sources of liquidity.
Despite the company’s inherent strength, our proven model does not conclusively show that Cintas is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is currently at 0.00%.
Zacks Rank: Cintas’ Zacks Rank #4 (Sell) reduces the predictive power of ESP. The Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Comerica Incorporated (CMA - Free Report) has an earnings ESP of +1.47% and Zacks Rank #3.
Regions Financial Corporation (RF - Free Report) has an earnings ESP of +5.00% and Zacks Rank #3.
Federated Investors, Inc. has an earnings ESP of +2.13% and Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Can Cintas (CTAS) Beat Earnings Estimate Yet Again in Q4?
Leading business service provider Cintas Corporation (CTAS - Free Report) is scheduled to report fourth-quarter fiscal 2016 results after the closing bell on Jul 19. In the last reported quarter, earnings comfortably exceeded the Zacks Consensus Estimate by 10 cents. Cintas has beaten earnings estimates in each of the last four quarters with an average positive earnings surprise of 4.5%. Let’s see how things are shaping up for this announcement.
Key Factors in the Fourth Quarter
Cintas is expected to achieve broad-based revenue growth in the quarter with the continued improvements in the pricing environment and higher operational efficiency. The company aims to continually achieve revenue buildup by increasing the existing customer penetration level and broadening the customer base to include business segments that are not historically served. The company is expected to capitalize on the growth prospects in the rental first aid and direct sale businesses. Leveraging its well-equipped infrastructure resources, Cintas is also expected to capitalize on its scale advantages to augment competitiveness. Furthermore, a more favorable pricing scenario and cost-streamlining initiatives are expected to drive incremental margins.
During the quarter, Cintas collaborated with Google’s Advanced Technology and Projects Group to explore the opportunities to upgrade Jacquard – a smart garment technology developed by the latter. Jacquard enables conductive fibers to be woven into textiles, connecting interactive apparel wirelessly to devices, software platforms, and cloud services. The collaboration aims to develop Jacquard-enhanced uniforms likely to be promoted by Cintas in the future. Although the collaboration is not likely to make any significant contribution in the soon-to-be-reported quarter, its impact on attracting potential revenue contribution from other clients is irrefutable.
In addition, Cintas has a strong balance sheet with adequate liquidity to meet its working capital requirements. The company also generates strong operating cash flow, which helps maintain its cash reserves. The company has consistently returned cash to its shareholders through stable dividend payouts and share repurchases. In addition, Cintas has easy access to commercial paper and long-term debt markets on favorable interest rate and other terms, which has historically provided it with adequate sources of liquidity.
CINTAS CORP Price and EPS Surprise
CINTAS CORP Price and EPS Surprise | CINTAS CORP Quote
Earnings Whispers
Despite the company’s inherent strength, our proven model does not conclusively show that Cintas is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is currently at 0.00%.
Zacks Rank: Cintas’ Zacks Rank #4 (Sell) reduces the predictive power of ESP. The Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Comerica Incorporated (CMA - Free Report) has an earnings ESP of +1.47% and Zacks Rank #3.
Regions Financial Corporation (RF - Free Report) has an earnings ESP of +5.00% and Zacks Rank #3.
Federated Investors, Inc. has an earnings ESP of +2.13% and Zacks Rank #3.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>