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Can Cintas (CTAS) Keep the Earnings Streak Alive in Q2?
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Leading business service provider Cintas Corporation (CTAS - Free Report) is scheduled to report second-quarter fiscal 2017 results after the closing bell on Dec 22. In the last reported quarter, adjusted earnings comfortably exceeded the Zacks Consensus Estimate by 3 cents. Cintas has beaten estimates in each of the last four quarters with an average positive earnings surprise of 5.54%. Let’s see how things are shaping up for this announcement.
Key Factors in the Quarter
Cintas aims to continually achieve revenue build up by increasing penetration levels at existing customers and broadening customer base to include fresh business segments. The company also identifies additional product and service opportunities for its current and future customers to expand its portfolio. This focused approach for steady top-line growth is commendable.
In order to fuel its growth momentum, Cintas has inked a definitive agreement to acquire rival G&K Services Inc. The combined company is likely to cater to over one billion business customers with an extended product portfolio and additional processing capacity. Customer service is also likely to improve with increased route density. The synergies from the combined operations are likely to yield $130 million to $140 million in cost savings and the transaction is anticipated to be accretive to Cintas’ earnings from the second year of its operation. Although the transaction is not likely to have any direct impact on the impending quarterly results, it is likely to attract favorable contracts from existing as well as new customers and improve the top line.
However, a persistent challenging macroeconomic environment has mostly driven customers to perform certain in-house services themselves, instead of outsourcing them to Cintas. This has resulted in loss of businesses.
In addition, the company procures raw materials from a wide variety of domestic and international suppliers, making it susceptible to market risks. The volatility in raw material costs such as cotton may weigh on the margins in the upcoming quarterly results. Also, U.S. and foreign trade policies, tariffs and other impositions on imported goods, trade sanctions, and limitations on the imports of certain types of goods, particularly after Brexit, may adversely affect its profitability.
Earnings Whispers
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 pegged at 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Cintas currently carries Zacks Rank #3. Although this increases the predictive power of ESP, the company’s 0.00% ESP makes an earnings prediction uncertain.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Micron Technology, Inc. (MU - Free Report) , with an Earnings ESP of +8.33% and a Zacks Rank #2.
FedEx Corporation (FDX - Free Report) , with an Earnings ESP of +1.03% and a Zacks Rank #3.
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How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
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Can Cintas (CTAS) Keep the Earnings Streak Alive in Q2?
Leading business service provider Cintas Corporation (CTAS - Free Report) is scheduled to report second-quarter fiscal 2017 results after the closing bell on Dec 22. In the last reported quarter, adjusted earnings comfortably exceeded the Zacks Consensus Estimate by 3 cents. Cintas has beaten estimates in each of the last four quarters with an average positive earnings surprise of 5.54%. Let’s see how things are shaping up for this announcement.
Key Factors in the Quarter
Cintas aims to continually achieve revenue build up by increasing penetration levels at existing customers and broadening customer base to include fresh business segments. The company also identifies additional product and service opportunities for its current and future customers to expand its portfolio. This focused approach for steady top-line growth is commendable.
In order to fuel its growth momentum, Cintas has inked a definitive agreement to acquire rival G&K Services Inc. The combined company is likely to cater to over one billion business customers with an extended product portfolio and additional processing capacity. Customer service is also likely to improve with increased route density. The synergies from the combined operations are likely to yield $130 million to $140 million in cost savings and the transaction is anticipated to be accretive to Cintas’ earnings from the second year of its operation. Although the transaction is not likely to have any direct impact on the impending quarterly results, it is likely to attract favorable contracts from existing as well as new customers and improve the top line.
CINTAS CORP Price and EPS Surprise
CINTAS CORP Price and EPS Surprise | CINTAS CORP Quote
However, a persistent challenging macroeconomic environment has mostly driven customers to perform certain in-house services themselves, instead of outsourcing them to Cintas. This has resulted in loss of businesses.
In addition, the company procures raw materials from a wide variety of domestic and international suppliers, making it susceptible to market risks. The volatility in raw material costs such as cotton may weigh on the margins in the upcoming quarterly results. Also, U.S. and foreign trade policies, tariffs and other impositions on imported goods, trade sanctions, and limitations on the imports of certain types of goods, particularly after Brexit, may adversely affect its profitability.
Earnings Whispers
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 pegged at 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: Cintas currently carries Zacks Rank #3. Although this increases the predictive power of ESP, the company’s 0.00% ESP makes an earnings prediction uncertain.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Western Digital Corporation (WDC - Free Report) , with an Earnings ESP of +16.77% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron Technology, Inc. (MU - Free Report) , with an Earnings ESP of +8.33% and a Zacks Rank #2.
FedEx Corporation (FDX - Free Report) , with an Earnings ESP of +1.03% and a Zacks Rank #3.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>