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Cintas (CTAS) Earnings & Revenues Surpass Estimates in Q1

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Cintas Corporation (CTAS - Free Report) kept its earnings streak alive in the first quarter of fiscal 2021 (ended Aug 31, 2020). It recorded an earnings beat of 28.7% and a sales beat of 2.3% in the quarter.

The company’s earnings were $2.78 per share, surpassing the Zacks Consensus Estimate of $2.16. The bottom line increased 19.8% from the year-ago figure of $2.32 on higher net income.

Revenue Details

In the quarter, Cintas’ net sales were $1,746.6 million, reflecting a decline of 3.6% from the year-ago quarter. Organic sales decreased 5% year over year. The pandemic played a spoilsport in the quarter.

Notably, the top line surpassed the Zacks Consensus Estimate of $1,708 million.

The company has two reportable segments — Uniform Rental and Facility Services, and First Aid and Safety Services. Other businesses like Uniform Direct Sale and Fire Protection Services are included in All Other. Quarterly sales data is briefly discussed below.

Revenues from the Uniform Rental and Facility Services (representing 79.8% of net sales) were $1,394.4 million, decreasing 4.1% year over year. Organic sales decreased 5.4%.

Revenues from the First Aid and Safety Services segment (representing 11.7% of net sales) totaled $204.5 million, increasing 18.8% year over year. Organic sales increased 17.1%.

Revenues from the All Other business (representing 8.5% of net sales) were $147.7 million, decreasing 19.9% year over year.

Cintas Corporation Price, Consensus and EPS Surprise

Cintas Corporation Price, Consensus and EPS Surprise

Cintas Corporation price-consensus-eps-surprise-chart | Cintas Corporation Quote

Margin Profile

In the fiscal first quarter, Cintas’ cost of sales (comprising costs related to uniform rental and facility services as well as others) decreased 4.3% year over year to $920.4 million. It represented 52.7% of net sales compared with 53.1% in the year-ago quarter. Gross profit decreased 2.7% to $826.2 million. Gross margin increased 40 basis points (bps) to 47.3%.

Selling and administrative expenses totaled $476.5 million, reflecting a 12.2% decline from the year-ago figure. It represented 27.3% of net sales. Operating margin increased 310 bps year over year to 20%.

Balance Sheet and Cash Flow

Exiting the quarter, Cintas’ cash and cash equivalents were $421.5 million, up 189.9% from $145.4 million at the end of the previous quarter. Long-term debt decreased 9.8% sequentially to $2,290.4 million.

In first three months of fiscal 2021, the company generated net cash of $312.3 million from operating activities, increasing 12.8% from the year-ago comparable period. Capital expenditure totaled $30.9 million, reflecting a decline of 52.2%. Free cash flow increased 32.6% to $281.4 million.

During the quarter, the company repurchased shares worth $69 million.

Outlook

The company is wary about the uncertainties related to the coronavirus outbreak. It refrained from providing any projections for fiscal 2021 (ending May 2021).

However, it provided projections for the fiscal second quarter. It anticipates revenues of $1.725-$1.750 billion, while earnings are expected to be $2.00-$2.20 per share.

Zacks Rank & Other Stocks to Consider

The company currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks from the Zacks Industrial Products sector are Enersys (ENS - Free Report) , Regal Beloit Corporation (RBC - Free Report) and II-VI Incorporated , each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enersys delivered a positive earnings surprise of 5.20%, on average, in the trailing four quarters.

Regal Beloit delivered a positive earnings surprise of 18.91%, on average, in the trailing four quarters.

II-VI delivered a positive earnings surprise of 64.90%, on average, in the trailing four quarters.

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