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Cintas (CTAS) Up 38% in 6 Months: Will the Momentum Continue?
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Shares of Cintas Corporation (CTAS - Free Report) have rallied 37.5% in a year, outperforming the industry’s 34.7% increase. The upside can be linked to increased volumes and healthy margin performance due to cost-control measures and pricing actions. Consistent rewards to shareholders also drove the stock higher.
Image Source: Zacks Investment Research
What’s Aiding Cintas?
Strong segmental performances are driving Cintas’ top line (up 13% year over year in the first nine months of fiscal 2023). Increased volumes and higher prices are driving revenues at the Uniform Rental and Facility Services segment (revenues rose 11.5% year over year in the first nine months of fiscal 2023).
Strength across the first aid cabinet service business is boosting the First Aid and Safety Services segment’s performance. Revenues from the segment climbed 14.2% in the first nine months of fiscal 2023. Cintas is also seeing strong growth across its uniform direct sale (32% organic growth in fiscal third quarter) and fire protection services (20.7% organic growth in fiscal third quarter) businesses.
Cintas' focus on enhancement of its product portfolio, along with investments in technology and existing facilities, should continue to drive its performance. Also, its focus on operational execution, cost-control measures, and pricing actions is helping it maintain healthy margin performance. For instance, in the fiscal third quarter, gross margin increased 140 basis points to 47.2%.
Cintas’ commitment to reward its shareholders through dividends and share buybacks holds promise. In the first nine months of fiscal 2023, the company repurchased shares worth $370.92 million and paid dividends of $332.42 million. In fiscal 2022, the company repurchased shares worth $1.53 billion, up from $554.12 million in the year-ago period. Dividend payments totaled $375.12 million in fiscal 2022.
Cintas has a track record of consistently raising dividends for 39 straight years. Owing to strong performance in fiscal 2022, the company hiked its quarterly dividend by 21.1% to $1.15 per share in July 2022. In addition to the dividend hike, the company’s board also approved a new share buyback program, authorizing the company to buy back up to $1.5 billion worth of shares.
Will the Uptrend in Shares Last?
With market conditions remaining strong, continued strength across key end markets should drive Cintas’ growth. Improving supply chains bode well for the company’s growth in 2023.
CTAS’ bullish outlook for fiscal 2023 highlights the buoyant scenario ahead of the company. The company now expects revenues of $8.74-$8.80 billion in fiscal 2023 compared with $8.67-$8.75 billion anticipated earlier. Earnings are estimated to be in the range of $12.70-$12.90 per share compared with $12.50-$12.80 expected earlier.
For fiscal 2023, Cintas expects adjusted operating income between $1.77 and $1.80 compared with $1.75-$1.79 billion anticipated earlier. In fiscal 2022, the company reported operating income of $1.55 billion.
Zacks Rank & Other Stocks to Consider
Cintas carries a Zacks Rank #2 (Buy). Some other top-ranked stocks within the broader Industrial Products sector are as follows:
Image: Bigstock
Cintas (CTAS) Up 38% in 6 Months: Will the Momentum Continue?
Shares of Cintas Corporation (CTAS - Free Report) have rallied 37.5% in a year, outperforming the industry’s 34.7% increase. The upside can be linked to increased volumes and healthy margin performance due to cost-control measures and pricing actions. Consistent rewards to shareholders also drove the stock higher.
Image Source: Zacks Investment Research
What’s Aiding Cintas?
Strong segmental performances are driving Cintas’ top line (up 13% year over year in the first nine months of fiscal 2023). Increased volumes and higher prices are driving revenues at the Uniform Rental and Facility Services segment (revenues rose 11.5% year over year in the first nine months of fiscal 2023).
Strength across the first aid cabinet service business is boosting the First Aid and Safety Services segment’s performance. Revenues from the segment climbed 14.2% in the first nine months of fiscal 2023. Cintas is also seeing strong growth across its uniform direct sale (32% organic growth in fiscal third quarter) and fire protection services (20.7% organic growth in fiscal third quarter) businesses.
Cintas' focus on enhancement of its product portfolio, along with investments in technology and existing facilities, should continue to drive its performance. Also, its focus on operational execution, cost-control measures, and pricing actions is helping it maintain healthy margin performance. For instance, in the fiscal third quarter, gross margin increased 140 basis points to 47.2%.
Cintas’ commitment to reward its shareholders through dividends and share buybacks holds promise. In the first nine months of fiscal 2023, the company repurchased shares worth $370.92 million and paid dividends of $332.42 million. In fiscal 2022, the company repurchased shares worth $1.53 billion, up from $554.12 million in the year-ago period. Dividend payments totaled $375.12 million in fiscal 2022.
Cintas has a track record of consistently raising dividends for 39 straight years. Owing to strong performance in fiscal 2022, the company hiked its quarterly dividend by 21.1% to $1.15 per share in July 2022. In addition to the dividend hike, the company’s board also approved a new share buyback program, authorizing the company to buy back up to $1.5 billion worth of shares.
Will the Uptrend in Shares Last?
With market conditions remaining strong, continued strength across key end markets should drive Cintas’ growth. Improving supply chains bode well for the company’s growth in 2023.
CTAS’ bullish outlook for fiscal 2023 highlights the buoyant scenario ahead of the company. The company now expects revenues of $8.74-$8.80 billion in fiscal 2023 compared with $8.67-$8.75 billion anticipated earlier. Earnings are estimated to be in the range of $12.70-$12.90 per share compared with $12.50-$12.80 expected earlier.
For fiscal 2023, Cintas expects adjusted operating income between $1.77 and $1.80 compared with $1.75-$1.79 billion anticipated earlier. In fiscal 2022, the company reported operating income of $1.55 billion.
Zacks Rank & Other Stocks to Consider
Cintas carries a Zacks Rank #2 (Buy). Some other top-ranked stocks within the broader Industrial Products sector are as follows:
Flowserve (FLS - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 2.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Flowserve has an estimated earnings growth rate of 64.5% for the current year. Shares of the company have gained 25.2% in a year.
Graco (GGG - Free Report) currently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 7.9%, on average.
Graco has an estimated earnings growth rate of 16.4% for the current year. Shares of the company have rallied 44% in a year.