Back to top

Image: Bigstock

Here's Why it is Worth Investing in Cintas (CTAS) Stock Now

Read MoreHide Full Article

Cintas Corporation (CTAS - Free Report) can currently be considered a smart choice for investors seeking exposure in the uniform-related space. It boasts solid growth prospects, evident from positive revision in earnings estimates, and has solid fundamentals.

The  Cincinnati, OH-based company currently has a Zacks Rank #2 (Buy) and a VGM Score of B. It belongs to the Zacks Uniform and Related industry, which belongs to the broader Zacks Industrial Products sector.

The industry is currently placed in the top 12% (with the Zacks Industry Rank #31) of more than 250 Zacks industries. Notably, the top 50% of the Zacks-ranked industries tend to outperform the bottom 50% by a factor of more than 2 to 1.

Below we discussed why it is worth investing in Cintas.

Healthy Performance and Solid Growth Prospects: The company has surpassed estimates in all of the past four quarters, with a positive earnings surprise of 8.5%, on average. In the second quarter of fiscal 2020 (ended Nov 30, 2019), its earnings of $2.27 per share surpassed the Zacks Consensus Estimate by 11.27%.

We believe that impressive financial results helped drive sentiments for the stock. Notably, the company’s shares gained 3.2% since the release of results on Dec 17, 2019, whereas the industry grew 2.1%.

Cintas anticipates delivering better results in fiscal 2020 (ending May 2020). It raised earnings projection for the fiscal year to $8.65-$8.75 per share from previously mentioned $8.47-$8.57.

Also, the company’s earnings estimates have been revised positively in the past 30 days. Currently, the Zacks Consensus Estimate for its earnings is pegged at $8.79 for fiscal 2020 and $9.61 for fiscal 2021 (ending May 2021), reflecting 1.9% and 1.5% rise from the respective 30-day-ago figures.

Cintas Corporation Price and Consensus


Cintas Corporation Price and Consensus

Cintas Corporation price-consensus-chart | Cintas Corporation Quote

Solid Revenue Prospects: Cintas is focused on enhancing its product portfolio and building a solid customer base. Also, investment in technology and business expansion through buyouts will likely help in improving the top line.

For fiscal 2020, the company anticipates revenues of $7.29-$7.33 billion, up from previously stated $7.28-$7.32 billion. The revised guidance suggests growth of 5.8-6.4% from the year-ago reported figure.

The Zacks Consensus Estimate for Cintas’ revenues is pegged at $7.33 billion for fiscal 2020 and $7.76 billion for fiscal 2021, suggesting year-over-year growth of 6.3% and 5.9%, respectively.

Acquired Assets: The company has been investing in acquisitions over time. In the first half of fiscal 2020, Cintas used $6.6 million for acquisitions.

Notably, one of the significant buyouts of Cintas is that of its rival, G&K Services Inc., in March 2017. Since the buyout, G&K has been strengthening Cintas’ product portfolio, customer profile and processing capacity. Also, the buyout helped improve the company’s customer service.

Rewards to Shareholders: Cintas is committed toward rewarding shareholders handsomely through dividend payments and share buybacks. In fiscal 2019, the company repurchased common stock worth $1,016.3 million and paid out dividends of $220.8 million. Further, it bought back shares worth $258.7 million in the first half of fiscal 2020.

It is worth mentioning here that the company announced a $1-billion share buyback program and a 24.4% increase in its annual dividend rate in October 2019. We believe that healthy cash flow position will help Cintas in rewarding shareholders going forward.

Other Key Picks

Some other top-ranked stocks in the sector are Kaman Corporation (KAMN - Free Report) , DXP Enterprises, Inc (DXPE - Free Report) and Standex International Corporation (SXI - Free Report) . While Kaman currently sports a Zacks Rank #1 (Strong Buy), DXP Enterprises and Standex carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, earnings estimates for Kaman and DXP Enterprises have improved for the current year, while the same has been unchanged for Standex. Further, positive earnings surprise for the last reported quarter was 17.95% for Kaman, 16.39% for DXP Enterprises and 2.11% for Standex.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers “Most Likely for Early Price Pops.”

Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.6% per year. So be sure to give these hand-picked 7 your immediate attention.

See 7 handpicked stocks now >>

Published in