Improved sales of uniforms and related products led to a 10.3% revenue jump for this company during the third quarter.
We love its prospects for even higher earnings as it consolidates its operations and benefits from growing economy of scale.
Meanwhile the stock trades at 36.6 times the company’s forward earnings forecast.
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CINTAS CORP. (Nasdaq symbol CTAS; www.cintas.com) designs and makes uniforms, then sells them to businesses, mainly in North America. It also offers related products and services such as office-cleaning and first-aid kits.
The uniform rental business is highly fragmented, so Cintas will probably look to make more acquisitions of smaller firms. That will help expand its market share, particularly as it now serves just 1 million of the 16 million businesses in North America.
Meanwhile, lower costs and rising prices are improving the company’s outlook.
Cintas’s earnings should also continue to improve as it updates its various computer systems to a single platform. That will give it better control over inventories and speed up the collection of payments from its clients. Better knowledge of trends in local markets will also help Cintas with its plan to start raising prices after freezing them for the past two years.
The stock has rebounded strongly since its March 2020 fall to $154.33, and it should continue to move up as more businesses, particularly airlines and hotels, re-open. As well, the company is developing new sanitizers and other cleaning products to help businesses operate safely.
In its fiscal 2022 third quarter, ended February 28, 2022, Cintas’s revenue rose 10.3%, to $1.96 billion from $1.78 billion a year earlier. That beat the consensus forecast of $1.91 billion.
Excluding a tax-related gain on an investment, the company’s earnings rose 13.5%, to $2.69 a share from $2.37. That also beat the consensus estimate of $2.44 a share.
Cintas now expects to earn between $10.70 and $10.95 a share for all of fiscal 2022, up from its earlier forecast of $10.60 to $10.90 a share. The stock trades at 36.6 times the midpoint of that new range. That’s a high p/e, but still acceptable given the company’s strong market share and improving profitability. The $3.80 dividend yields 1.0%.
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