Yahoo Finance Cintas (CTAS) Down 3.2% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Cintas (CTAS). Shares have lost about 3.2% in that time frame, outperforming 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 drivers.
Cintas Q3 Earnings & Revenues Beat Estimates, View Up
Cintas reported third-quarter fiscal 2024 (ended Feb 29, 2024) earnings of $3.84 per share, beating the Zacks Consensus Estimate of $3.56. The bottom line increased 22.3% year over year despite an increase in operating costs.
Total revenues of $2,406.2 million outperformed the Zacks Consensus Estimate of $2,379 million. The top line rose 9.9% year over year, driven by higher segmental revenues. Organic sales were up 7.7% 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% of the reported quarter’s net sales) totaled $1.88 billion, up 9.4% year over year.
Revenues from the First Aid and Safety Services segment (representing 10.9% of the reported quarter’s net sales) totaled $262.6 million, up 13.4% year over year.
Revenues from All Other business (representing 11.1% of the reported quarter’s net sales) totaled $266.9 million, up 10.2% 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 5.4% year over year to $1.22 billion. It represented approximately 50.6% of net sales. Gross profit increased 14.9% to $1.19 billion. The gross margin was 49.4% in the reported quarter compared with 47.2% in the year-ago period. Our estimate for the gross margin was pegged at 47.7% for the quarter.
Selling and administrative expenses totaled $667 million, reflecting an 13.6% increase from the year-ago figure. It represented 27.7% of net sales. The operating margin in the reported quarter was 21.6% compared with 20.4% in the year-ago quarter. Interest expenses decreased 11.4% to $25.5 million.
Balance Sheet and Cash Flow
Exiting the fiscal third quarter, Cintas had cash and cash equivalents of $128.5 million compared with $124.1 million at the end of fiscal 2023. Long-term debt was about $2.48 billion compared with $2.49 billion at the end of fiscal 2023.
In the first nine months of fiscal 2024, CTAS generated net cash of $1.39 billion from operating activities, up 32.8% from the year-ago period. Capital expenditures in the same period totaled $307.6 million, up 37.3% year over year. Free cash flow increased 31.6% year over year to $1.08 billion.
In the first nine months of fiscal 2024, the company repurchased shares worth $468.2 million compared with $370.9 million in the year-ago period. In the same period, dividend payments totaled $393.3 million, up approximately 18.3% year over year.
Fiscal 2024 Guidance Raised
For fiscal 2024, Cintas now expects revenues of $9.57-$9.60 billion compared with $9.48-$9.56 billion anticipated earlier. The mid-point of the guidance — $9.585 billion — indicates year-over-year growth of 8.7%. Earnings per share are estimated to be in the range of $14.80-$15.00 compared with $14.35-$14.65, estimated earlier. The mid-point of the guided range — $14.90 — reflects a year-over-year increase of 14.7%.
Cintas predicts interest expense of approximately $99 million in the fiscal 2024. This compares with the interest expense of $109.5 million recorded in fiscal 2023. The effective tax rate is expected to be 20.6% compared with 20.4% recorded in fiscal 2023.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Cintas has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile 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
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cintas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Cintas Corporation (CTAS) : Free Stock Analysis Report
