Leading business service provider Cintas Corporation (CTAS - Free Report) is scheduled to report first-quarter fiscal 2018 results after the closing bell on Sep 26. In the last reported quarter, its adjusted earnings beat the Zacks Consensus Estimate by 10 cents. Let’s see how things are shaping up for this announcement.
Key Factors to Consider
Cintas has completed the acquisition of rival, G&K Services Inc. With annual revenues of approximately $1 billion, G&K Services has over 170,000 customers in the United States and Canada. The successful integration of G&K Services is likely to expand Cintas’ customer profile and augment its revenues. The combined company is expected 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 expected to yield $130 million to $140 million in cost savings and the transaction is anticipated to be accretive to Cintas’ earnings in the full year of its operation.
Furthermore, Cintas recorded industry leading revenue growth over the past few quarters with continued focus on core businesses. New business wins, deeper penetration of existing customers with more products and services and customer retention remain key strengths of the company. In addition, Cintas 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 likely to reap benefits in the to-be-reported quarter as well.
Cintas has a strong balance sheet with adequate liquidity to meet its working capital requirements. Over the years, the company has consistently returned significant cash to its shareholders through dividends and share repurchases. Its investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach to focus on the relative value of the various sectors within the broader industry.
However, a persistently challenging macroeconomic environment has mostly driven customers to perform certain in-house services themselves instead of outsourcing them to Cintas. This is expected to result in some loss of businesses. In addition, significant international operations expose it to risks of fluctuation in foreign exchange rates, which in turn is likely to impact its financial results.
Earnings Whispers
Our proven model does not conclusively show that Cintas is likely to beat earnings this quarter as it does not possess 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 of $1.23 and the Zacks Consensus Estimate of $1.26, is -2.54%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Cintas currently carries a Zacks Rank #2. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) 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:
Alcoa Corporation (AA - Free Report) , with an Earnings ESP of +6.80% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Altra Industrial Motion Corp. , with an Earnings ESP of +2.92% and a Zacks Rank #1.
Allegion plc (ALLE - Free Report) , with an Earnings ESP of +0.25% and a Zacks Rank #2.
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Leading business service provider Cintas Corporation (CTAS - Free Report) is scheduled to report first-quarter fiscal 2018 results after the closing bell on Sep 26. In the last reported quarter, its adjusted earnings beat the Zacks Consensus Estimate by 10 cents. Let’s see how things are shaping up for this announcement.
Key Factors to Consider
Cintas has completed the acquisition of rival, G&K Services Inc. With annual revenues of approximately $1 billion, G&K Services has over 170,000 customers in the United States and Canada. The successful integration of G&K Services is likely to expand Cintas’ customer profile and augment its revenues. The combined company is expected 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 expected to yield $130 million to $140 million in cost savings and the transaction is anticipated to be accretive to Cintas’ earnings in the full year of its operation.
Furthermore, Cintas recorded industry leading revenue growth over the past few quarters with continued focus on core businesses. New business wins, deeper penetration of existing customers with more products and services and customer retention remain key strengths of the company. In addition, Cintas 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 likely to reap benefits in the to-be-reported quarter as well.
Cintas has a strong balance sheet with adequate liquidity to meet its working capital requirements. Over the years, the company has consistently returned significant cash to its shareholders through dividends and share repurchases. Its investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach to focus on the relative value of the various sectors within the broader industry.
However, a persistently challenging macroeconomic environment has mostly driven customers to perform certain in-house services themselves instead of outsourcing them to Cintas. This is expected to result in some loss of businesses. In addition, significant international operations expose it to risks of fluctuation in foreign exchange rates, which in turn is likely to impact its financial results.
Earnings Whispers
Our proven model does not conclusively show that Cintas is likely to beat earnings this quarter as it does not possess 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 of $1.23 and the Zacks Consensus Estimate of $1.26, is -2.54%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Cintas currently carries a Zacks Rank #2. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) 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:
Alcoa Corporation (AA - Free Report) , with an Earnings ESP of +6.80% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Altra Industrial Motion Corp. , with an Earnings ESP of +2.92% and a Zacks Rank #1.
Allegion plc (ALLE - Free Report) , with an Earnings ESP of +0.25% and a Zacks Rank #2.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure.
See these buy recommendations now >>
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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