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Cintas (CTAS) Up 11.9% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Cintas (CTAS - Free Report) . Shares have added about 11.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cintas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cintas' Q1 Earnings and Sales Beat, Increase Y/Y
Cintas reported impressive results for the first quarter of fiscal 2022 (ended Aug 31, 2021). Its earnings and revenues surpassed the Zacks Consensus Estimate by 12.7% and 1.3%, respectively.
The company’s earnings for the reported quarter were $3.11 per share, surpassing the Zacks Consensus Estimate of $2.76. On a year-over-year basis, the bottom line increased 11.9% from the year-ago figure of $2.78 on sales growth. The impact of the sales increase was partially offset by higher costs and expenses.
Revenue Details
For the quarter under review, Cintas’ net sales were $1,897 million, reflecting growth of 8.6% from the year-ago period. Organic sales for the reported quarter were up 8.6% year over year. The top line surpassed the Zacks Consensus Estimate of $1,873 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 segment (representing 79.5% of the reported quarter’s net sales) were $1,508.2 million, increasing 8.2% year over year.
Revenues from the First Aid and Safety Services segment (representing 10.5% of the reported quarter’s net sales) totaled $199.1 million, decreasing 2.6% year over year.
Revenues from the All Other business (representing 10% of the reported quarter’s net sales) were $189.7 million, increasing 28.4% year over year.
Margin Profile
For the quarter under review, Cintas’ cost of sales (comprising expenses related to uniform rental and facility services as well as others) increased 8% year over year to $994.2 million. It represented 52.4% of net sales. Gross profit for the reported quarter increased 9.3% year over year to $902.8 million. Gross margin was 47.6%, up 30 basis points (bps) year over year.
Selling and administrative expenses totaled $508.7 million, reflecting a 6.7% increase from the year-ago figure. It represented 26.8% of net sales. Operating margin for the reported quarter increased 80 bps year over year to 20.8%. Interest expenses decreased 11% from the prior-year quarter to $21.9 million.
Balance Sheet and Cash Flow
Exiting the fiscal first quarter, Cintas had cash and cash equivalents of $79.7 million, down 83.9% from $493.6 million at the end of the previous quarter. Long-term debt was $1,343.2 million, reflecting an 18.2% decline from the previous quarter.
In the first three months of fiscal 2022, the company generated net cash of $262.1 million from operating activities, decreasing 16.1% from the comparable period of the previous year. Capital expenditure totaled $48.7 million, reflecting a year-over-year increase of 57.6%. Free cash flow decreased 24.2% year over year to $213.4 million.
In the first three months of fiscal 2022, it repurchased shares worth $659.2 million compared with $69 million in the year-ago-period. Dividend payments totaled $79.1 million versus no dividend payment made in the year-ago period.
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For fiscal 2022 (ending May 2022), Cintas anticipates revenues of $7.58-$7.67 billion, higher than $7.53-$7.63 billion predicted earlier. The company anticipates earnings per share of $10.60-$10.90 compared with $10.35-$10.75 guided earlier.
The tax rate for the fiscal year is expected to be 19.5%, indicating an increase from 13.7% recorded in fiscal 2021. High taxes are likely to lower earnings by 77 cents per share and year-over-year bottom-line growth by 760 bps.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Cintas has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cintas has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Cintas (CTAS) Up 11.9% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Cintas (CTAS - Free Report) . Shares have added about 11.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cintas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cintas' Q1 Earnings and Sales Beat, Increase Y/Y
Cintas reported impressive results for the first quarter of fiscal 2022 (ended Aug 31, 2021). Its earnings and revenues surpassed the Zacks Consensus Estimate by 12.7% and 1.3%, respectively.
The company’s earnings for the reported quarter were $3.11 per share, surpassing the Zacks Consensus Estimate of $2.76. On a year-over-year basis, the bottom line increased 11.9% from the year-ago figure of $2.78 on sales growth. The impact of the sales increase was partially offset by higher costs and expenses.
Revenue Details
For the quarter under review, Cintas’ net sales were $1,897 million, reflecting growth of 8.6% from the year-ago period. Organic sales for the reported quarter were up 8.6% year over year. The top line surpassed the Zacks Consensus Estimate of $1,873 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 segment (representing 79.5% of the reported quarter’s net sales) were $1,508.2 million, increasing 8.2% year over year.
Revenues from the First Aid and Safety Services segment (representing 10.5% of the reported quarter’s net sales) totaled $199.1 million, decreasing 2.6% year over year.
Revenues from the All Other business (representing 10% of the reported quarter’s net sales) were $189.7 million, increasing 28.4% year over year.
Margin Profile
For the quarter under review, Cintas’ cost of sales (comprising expenses related to uniform rental and facility services as well as others) increased 8% year over year to $994.2 million. It represented 52.4% of net sales. Gross profit for the reported quarter increased 9.3% year over year to $902.8 million. Gross margin was 47.6%, up 30 basis points (bps) year over year.
Selling and administrative expenses totaled $508.7 million, reflecting a 6.7% increase from the year-ago figure. It represented 26.8% of net sales. Operating margin for the reported quarter increased 80 bps year over year to 20.8%. Interest expenses decreased 11% from the prior-year quarter to $21.9 million.
Balance Sheet and Cash Flow
Exiting the fiscal first quarter, Cintas had cash and cash equivalents of $79.7 million, down 83.9% from $493.6 million at the end of the previous quarter. Long-term debt was $1,343.2 million, reflecting an 18.2% decline from the previous quarter.
In the first three months of fiscal 2022, the company generated net cash of $262.1 million from operating activities, decreasing 16.1% from the comparable period of the previous year. Capital expenditure totaled $48.7 million, reflecting a year-over-year increase of 57.6%. Free cash flow decreased 24.2% year over year to $213.4 million.
In the first three months of fiscal 2022, it repurchased shares worth $659.2 million compared with $69 million in the year-ago-period. Dividend payments totaled $79.1 million versus no dividend payment made in the year-ago period.
View
For fiscal 2022 (ending May 2022), Cintas anticipates revenues of $7.58-$7.67 billion, higher than $7.53-$7.63 billion predicted earlier. The company anticipates earnings per share of $10.60-$10.90 compared with $10.35-$10.75 guided earlier.
The tax rate for the fiscal year is expected to be 19.5%, indicating an increase from 13.7% recorded in fiscal 2021. High taxes are likely to lower earnings by 77 cents per share and year-over-year bottom-line growth by 760 bps.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Cintas has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cintas has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.