Back to top

Image: Bigstock

Here's Why You Should Add Cintas (CTAS) Stock to Your Portfolio

Read MoreHide Full Article

Cintas Corporation (CTAS - Free Report) is well poised for growth, courtesy of strength across its business, strategic acquisitions and focus on improving the product line and operational excellence.

The company remains committed to investing in growth opportunities and solidifying its long-term market position.

Zacks Investment Research
Image Source: Zacks Investment Research

It has a market capitalization of $72.1 billion. Over the past year, it has soared 46.5% compared with the industry’s growth of 42.8%. CTAS currently carries a Zacks Rank #2 (Buy).

Let’s delve into the factors that have been aiding the firm for a while now.

Business Strength: CTAS has been benefiting from strength in its Uniform Rental and Facility Services segment, driven by penetration of additional products and services into existing customers. The segment’s revenues rose 9.4% year over year in the fiscal third quarter (ended February 2024).
Strong demand for its products and services, pricing actions and solid customer retention have been boosting the First Aid and Safety Services segment’s performance. Revenues from the segment climbed 13.4% year over year in the fiscal third quarter.

Given the strength across its businesses, management expects revenues in the range of $9.57-$9.60 billion in fiscal 2024, indicating growth of 8.7% at the mid-point from the year-ago levels.

Acquisition Benefits: Cintas remains focused on acquiring businesses to gain access to new customers and product lines. The company acquired Paris Uniform Services, a family-owned supplier of uniform and facility service solutions, in March 2024. The buyout is expected to enhance its presence in Pennsylvania, New York, Maryland and West Virginia. Also, the buyout of SITEX in February 2024 is likely to strengthen its market position in the central Midwest region. In the fiscal third quarter, acquisitions boosted revenue growth by 0.5%.

Business Initiatives: The company's focus on enhancement of its product portfolio, along with investments in technology and existing facilities, should continue to drive its performance. Also, Cintas’ focus on operational executions and pricing actions is helping it to maintain a healthy margin. For instance, in the fiscal third quarter, its gross margin increased 220 basis points year over year to 49.4%.

Shareholder-Friendly Policies: Cintas remains committed to rewarding its shareholders through dividend payouts and share buybacks. In the first nine months of fiscal 2024, it paid dividends of $393.3 million and repurchased shares worth $468.1 million. Also, the company hiked its quarterly dividend by 17.4% to $1.35 per share in July 2023.

3 Other Promising Stocks

We have highlighted three other top-ranked stocks from the Zacks Industrial Products sector, namely AZZ Inc. (AZZ - Free Report) , Valmont Industries (VMI - Free Report) and Mueller Water Products (MWA - Free Report) . While VMI sports a Zacks #1 Rank (Strong Buy), AZZ and MWA carry a Zacks Rank of 2 each. You can see the complete list of today’s Zacks #1 Rank stocks here.

AZZ delivered a trailing four-quarter average earnings surprise of 36%. In the past 60 days, the Zacks Consensus Estimate for AZZ’s 2024 earnings has increased 5.3%.

Valmont Industries has a trailing four-quarter average earnings surprise of 13%. The consensus estimate for VMI’s 2024 earnings has risen 7% in the past 60 days.

Mueller Water Products delivered a trailing four-quarter average earnings surprise of 51.8%. In the past 60 days, the consensus estimate for MWA’s 2024 earnings has improved by 14.5%.

Published in