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Cintas (CTAS) Beats Q2 Earnings & Sales Estimates, Raises View

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Cintas Corporation (CTAS - Free Report) has delivered better-than-expected results for the second quarter of fiscal 2022 (ended Nov 30, 2021). Its earnings surpassed the Zacks Consensus Estimate by 5.34%.

The company’s earnings in the reported quarter were $2.76 per share, surpassing the Zacks Consensus Estimate of $2.62. On a year-over-year basis, the bottom line increased 5.3% from the year-ago figure of $2.62. The impacts of the sales increase were partially offset by higher costs and expenses.

Excluding the impacts of 25 cents per share of pre-tax gain recorded in second-quarter fiscal 2021, the company’s reported quarter’s earnings reflect a year-over-year increase of 16.5%.

Revenue Details

In the quarter under review, Cintas’ net sales were $1,922.3 million, reflecting growth of 9.4% from the year-ago quarter. Organic sales in the reported quarter were up 9.3% year over year. The top line surpassed the Zacks Consensus Estimate by 0.86%.

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 79.9% of the reported quarter’s net sales) were $1,535.3 million, increasing 8.8% year over year.

Revenues from the First Aid and Safety Services segment (representing 10.5% of the reported quarter’s net sales) totaled $202.2 million, increasing 4% year over year.

Revenues from the All Other business (representing 9.6% of the reported quarter’s net sales) were $184.9 million, increasing 21.5% year over year.

Margin Profile

In the quarter under review, Cintas’ cost of sales (comprising costs related to uniform rental and facility services as well as others) increased 10.7% year over year to $1,037.1 million. It represented 54% of net sales. Gross profit in the reported quarter increased 8% year over year to $885.1 million. The gross margin was 46%, down from 46.7% in the year-ago quarter. High labor and energy expenses played spoilsports in the quarter.

Selling and administrative expenses totaled $503.9 million, reflecting a 7.9% increase from the year-ago figure. It represented 26.2% of net sales. The operating margin (adjusted) in the reported quarter increased 70 basis points (bps) year over year to 19.8%. Interest expenses decreased 10.8% to $21.9 million.

Balance Sheet and Cash Flow

Exiting the fiscal second quarter, Cintas had cash and cash equivalents of $113.2 million, up 42% from $79.7 million at the end of the previous quarter. Long-term debt was $1,343.4 million, reflecting no change from the previous quarter.

In the first half of fiscal 2022, the company repaid debts of $250 million.

In the first half of fiscal 2021, it generated net cash of $593.8 million from operating activities, increasing 3.6% from the year-ago period. Capital expenditure totaled $108.6 million, reflecting a year-over-year increase of 88.4%. Free cash flow decreased 5.9% year over year to $485.2 million.

In the six months of the fiscal year, the company repurchased shares worth $664.7 million, up from $71.4 million used in the year-ago period. Dividend payments totaled $177.9 million in the first half of this fiscal year.

Outlook

For fiscal 2022 (ending May 2022), Cintas anticipates revenues of $7.63-$7.70 billion, higher than $7.58-$7.67 billion stated earlier. The company expects earnings per share of $10.70-$10.95 compared with $10.60-$10.90 mentioned earlier.

The tax rate for the fiscal year is expected to be 19%, indicating an increase from 13.7% recorded in fiscal 2021. High taxes are likely to lower earnings by 72 cents per share and affect year-over-year earnings growth by 700 bps.

Cintas Corporation Price, Consensus and EPS Surprise

 

Cintas Corporation Price, Consensus and EPS Surprise

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

Zacks Rank & Stocks to Consider

With a market capitalization of $45.2 billion, Cintas currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Industrial Products sector are discussed below.

Helios Technologies, Inc. (HLIO - Free Report) presently sports a Zacks Rank #1 (Strong Buy). Its earnings beat in the last reported quarter was 30.49%. The earnings beat in the last four quarters was 37.54%, on average.

You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, Helios’ earnings estimates have increased 7.9% for 2021 and 9.6% for 2022. HLIO’s shares have lost 3.4% in the past three months.

Ingersoll Rand Inc. (IR - Free Report) reported better-than-expected results in the last reported quarter, with earnings surpassing estimates by 23.91%. Its earnings surprise in the last four quarters was 19.78%, on average. The company presently carries a Zacks Rank #2 (Buy).

Ingersoll’s earnings estimates increased 11.7% for 2021 and 7.9% for 2022 in the past 60 days. IR’s shares have gained 15.7% in the past three months.

Applied Industrial Technologies, Inc.’s (AIT - Free Report) results in the last reported quarter were impressive, with earnings surpassing estimates by 14.29%. Its last four-quarter average earnings surprise was 26.71%. The company presently carries a Zacks Rank #2.

Applied Industrial’s earnings estimates have increased 1.9% for fiscal 2022 (ending June 2022) and 2.2% for fiscal 2023 (ending June 2023) in the past 60 days. AIT’s shares have gained 4.7% in the past three months.