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Why Is Cintas (CTAS) Down 3.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for Cintas (CTAS - Free Report) . Shares have lost about 3.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cintas due for a breakout? 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 Surpasses Q3 Earnings and Sales Estimates
Cintas Corporation reported third-quarter fiscal 2023 (ended Feb 28, 2023) earnings of $3.14 per share, beating the Zacks Consensus Estimate of $3.01. This compares to our estimate of $2.97. The bottom line increased year over year despite high costs.
Total revenues of $2,190 million outperformed the Zacks Consensus Estimate of $2,145 million. Our estimate for fiscal third-quarter revenues stood at $2,128.7 million. The top line climbed 11.7% year over year due to higher segmental revenues. Organic sales were up 11.8% year over year.
Segmental Results
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 78.4% of the reported quarter’s net sales) reached $1,716.17 million, increasing 10.5% year over year.
Revenues from the First Aid and Safety Services segment (representing 10.6% of the reported quarter’s net sales) totaled $231.61 million, increasing 18.8% year over year.
Revenues from the All Other business (representing 11.1% of the reported quarter’s net sales) reached $242.22 million, increasing 29.2% year over year.
Margin Profile
In the quarter under review, Cintas’ cost of sales (comprising costs related to uniform rental and facility services and others) increased 8.8% year over year to $1,155.96 million. It represented approximately 53% of net sales. Gross profit increased 15% to $1,034.03 million. The gross margin was 47.2%, up from 45.8% in the year-ago fiscal quarter.
Selling and administrative expenses totaled $ 587.22 million, reflecting a 19.7% increase from the year-ago figure. It represented 26.8% of net sales. The operating margin in the reported quarter declined 40 basis points to 20.4%. Interest expenses increased 30.8% to $28.82 million.
Balance Sheet and Cash Flow
Exiting the fiscal third quarter, Cintas had cash and cash equivalents of $88.56 million, down 2.1% from the figure reported at the end of the fourth quarter of fiscal 2022. Long-term debt was $2,486 million, almost flat from the figure reported at the end of the fourth quarter of fiscal 2022.
At the end of the fiscal third quarter, CTAS generated net cash of $1,044.19 million from operating activities, increasing 5.8% from the year-ago period. Capital expenditure totaled $224.12 million in the period, up 35.1% year over year. Free cash flow was almost flat at $820.07 million in the first nine months of fiscal 2023.
In the first nine months of fiscal 2023, the company repurchased shares worth $370.92 million, down from $1,221.84 million in the year-ago period. Dividend payments totaled $332.42 million in the same period, up 20% year over year.
Fiscal 2023 Outlook Improved
Cintas raised its fiscal 2023 earnings and revenue guidance. The company now expects revenues of $8.74-$8.80 billion for the current fiscal year, compared with $8.67-$8.75 billion anticipated earlier.
CTAS expects earnings of $12.70-$12.90 per share for the ongoing fiscal year compared with $12.50-$12.80 estimated earlier.
For fiscal 2023, adjusted operating income is expected to be $1.77-$1.80 billion ($$1.55 billion was reported in fiscal 2022). The effective tax rate is expected to be 20.7% in fiscal 2023 compared to 17.9% reported in fiscal 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
Currently, Cintas has an average Growth Score of C, though it is lagging a bit 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
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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Why Is Cintas (CTAS) Down 3.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Cintas (CTAS - Free Report) . Shares have lost about 3.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cintas due for a breakout? 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 Surpasses Q3 Earnings and Sales Estimates
Cintas Corporation reported third-quarter fiscal 2023 (ended Feb 28, 2023) earnings of $3.14 per share, beating the Zacks Consensus Estimate of $3.01. This compares to our estimate of $2.97. The bottom line increased year over year despite high costs.
Total revenues of $2,190 million outperformed the Zacks Consensus Estimate of $2,145 million. Our estimate for fiscal third-quarter revenues stood at $2,128.7 million. The top line climbed 11.7% year over year due to higher segmental revenues. Organic sales were up 11.8% year over year.
Segmental Results
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 78.4% of the reported quarter’s net sales) reached $1,716.17 million, increasing 10.5% year over year.
Revenues from the First Aid and Safety Services segment (representing 10.6% of the reported quarter’s net sales) totaled $231.61 million, increasing 18.8% year over year.
Revenues from the All Other business (representing 11.1% of the reported quarter’s net sales) reached $242.22 million, increasing 29.2% year over year.
Margin Profile
In the quarter under review, Cintas’ cost of sales (comprising costs related to uniform rental and facility services and others) increased 8.8% year over year to $1,155.96 million. It represented approximately 53% of net sales. Gross profit increased 15% to $1,034.03 million. The gross margin was 47.2%, up from 45.8% in the year-ago fiscal quarter.
Selling and administrative expenses totaled $ 587.22 million, reflecting a 19.7% increase from the year-ago figure. It represented 26.8% of net sales. The operating margin in the reported quarter declined 40 basis points to 20.4%. Interest expenses increased 30.8% to $28.82 million.
Balance Sheet and Cash Flow
Exiting the fiscal third quarter, Cintas had cash and cash equivalents of $88.56 million, down 2.1% from the figure reported at the end of the fourth quarter of fiscal 2022. Long-term debt was $2,486 million, almost flat from the figure reported at the end of the fourth quarter of fiscal 2022.
At the end of the fiscal third quarter, CTAS generated net cash of $1,044.19 million from operating activities, increasing 5.8% from the year-ago period. Capital expenditure totaled $224.12 million in the period, up 35.1% year over year. Free cash flow was almost flat at $820.07 million in the first nine months of fiscal 2023.
In the first nine months of fiscal 2023, the company repurchased shares worth $370.92 million, down from $1,221.84 million in the year-ago period. Dividend payments totaled $332.42 million in the same period, up 20% year over year.
Fiscal 2023 Outlook Improved
Cintas raised its fiscal 2023 earnings and revenue guidance. The company now expects revenues of $8.74-$8.80 billion for the current fiscal year, compared with $8.67-$8.75 billion anticipated earlier.
CTAS expects earnings of $12.70-$12.90 per share for the ongoing fiscal year compared with $12.50-$12.80 estimated earlier.
For fiscal 2023, adjusted operating income is expected to be $1.77-$1.80 billion ($$1.55 billion was reported in fiscal 2022). The effective tax rate is expected to be 20.7% in fiscal 2023 compared to 17.9% reported in fiscal 2022.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
Currently, Cintas has an average Growth Score of C, though it is lagging a bit 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
Cintas has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.