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Cintas to Close Laurel Processing Plant to Boost Efficiency

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Cintas Corporation (CTAS - Free Report) , a leading business service provider, recently announced that it will close the processing plant in Laurel, MD, by the end of June to improve its overall efficiency levels. Consequently, the company will lay off about 47 employees, who would be given an opportunity to apply for other suitable positions within the organization or be provided with severance packages along with optional healthcare and job placement services.

The processing plant was mostly utilized for cleaning and repairing uniforms for delivery to customers. With the closure of the processing facilities, the plant would be converted for uniform pick-ups and drop-offs. The company revealed that the decision was purely based on its operating economics and was in no way related to the viability of the region. Management believed that the company had ample space at separate locations to economically process the uniforms, thus offering it an opportunity to be more efficient.   

Cintas aims to continually achieve revenue build-up by increasing penetration levels at existing customers and broadening the customer base to include fresh business segments. It also identifies additional product and service opportunities for its current and future customers to expand its portfolio. From fiscal 2010-2017, revenues of the company have witnessed a compounded annual growth rate of 5.2%.

In addition, Cintas has a strong balance sheet with adequate liquidity to meet its working capital requirements. Over the years, the company has consistently returned significant cash to its shareholders through dividends and share repurchases. Its investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach to focus on the relative value of the various sectors within the broader industry.

With a diligent execution of operational plans, Cintas has outperformed the industry with an average return of 8.5% in the last three months compared with a gain of 6.4% for the latter. It has also raised its earlier guidance for fiscal 2018 on favorable growth trends. Revenues are currently expected in the range of $6,365 million to $6,430 million, up from $6,325 million to $6,400 million anticipated earlier. Earnings from continuing operations are expected to be between $5.39 and $5.46 per share, up from earlier projections of $5.30-$5.38.

Cintas has a Zacks Rank #2 (Buy). Other stocks in the broader industry worth considering include Regal Beloit Corporation (RBC - Free Report) , ESCO Technologies Inc. (ESE - Free Report) and Emerson Electric Co. (EMR - Free Report) , each carrying Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Regal Beloit has a long-term earnings growth expectation of 11%. It has beaten earnings estimates twice in the trailing four quarters with an average positive surprise of 2.9%.

ESCO Technologies beat earnings estimates twice in the trailing four quarters with an average positive surprise of 2.4%.

Emerson Electric has a long-term earnings growth expectation of 10.6%. It has beaten earnings estimates twice in the trailing four quarters with an average positive surprise of 2.8%.

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