Daily Stock Watch: Cintas Corp (CTAS) Q1 Earnings Beat

By Kirsteen Mackay

In this article

  • Loading...
  • Want to see what you should be buying? Check out our top picks.

The Cintas share price slips as S&P futures are down 1.4%, near their worst levels in early Thursday morning trading.

Cintas Corp (NASDAQ: CTAS)

Cintas Corp (NASDAQ: CTAS) reported upbeat earnings on Wednesday, beating analyst expectations on earnings and sales by 8.4% and 3.9%, respectively. The fiscal Q1 2023 included EPS of $3.39 and revenues of $2.16bn. It also raised full-year guidance.

What Does Cintas Corp Do?

Cintas Corporation designs, manufactures and implements corporate identity uniform programs. The company also provides entrance mats, mops, restroom supplies, promotional products, document management, fire protection, and first aid and safety services.

Cintas Corporation is an American corporation headquartered in Mason, Ohio. Richard T. Farmer founded the company in 1968.

Farmer grew the company through acquisitions and start-ups, transforming it from a small family business into a billion-dollar public company. Mr. Farmer died in August 2021, aged 86. His son Scott D Farmer is the current Executive Chairman at Cintas.

Cintas is a publicly held Fortune 500 company traded over the Nasdaq Global Select Market under the symbol CTAS. It is a component of the Standard & Poor's 500 Index and Nasdaq-100 Index.

We covered CTAS stock in this week's earnings preview.

How Does Cintas Corp Make Money?

Cintas Corp makes money from three divisions. Its most significant revenue stream comes from renting uniforms and facility services. It also makes money in first aid and safety services. Its third revenue stream includes fire protection services and uniform direct sales.

Total revenue grew 14.2% in Q1, and each business unit grew revenue at a double-digit rate.

Meanwhile, operating cash flow is up 13.7% Y/Y, and free cash flow is up 7%. 

The company raised its full-year revenue expectations to $8.58bn and $8.67bn. 

Cintas also raised EPS guidance to range between $12.30 and $12.65. And it expects operating income to be between $1.72bn and $1.76bn, compared to $1.55bn in the fiscal year 2022.

Todd M. Schneider, Cintas' President and CEO, stated:

We are pleased with our fiscal 2023 first quarter financial results. These financial results are the product of the continued focus of our employee-partners on providing businesses with the image, safety, cleanliness and compliance needed to help our customers get Ready for the Workday®.

CTAS Stock Financials

Over the past year, CTAS stock has traded between $343.86 and $461.44. Today it trades at around $390. Year-to-date, the Cintas stock price is down by -7%, while the S&P 500 is down by -22.46% over the same period.

FactSet analysts have a consensus Overweight rating on CTAS stock with a target share price of $444.

CTAS stock has a price-to-earnings ratio (P/E) of 33, and its price-to-book-value (P/BV) is 12.4, indicating that it may be overvalued. CTAS stock comes with a dividend yield of 1.2%.

Cintas Corp Growth Potential

  • Cintas Corporation helps more than one million businesses of all types and sizes get Ready™ to open their doors with confidence every day by providing products and services that help keep their customer's facilities and employees clean, safe and looking their best.

  • The company aims to deliver high-quality products and services, which come at a justifiably higher price than its competitors.

  • Cintas has taken the initiative to make some bold business decisions that are paying off. For instance, it has brought some recognizable brand names to the uniform rental division, including Carhartt, Chef Works and Landau. This complements its aim to provide quality workwear. 

  • The company is optimistic in its outlook for the rest of the year, although it does face tougher comps Y/Y and expects a slight deceleration from its current growth levels.

  • Nevertheless, Cintas is enjoying positive momentum, which it hopes will translate into wider margins. It has also raised prices to combat inflation and has not experienced pushback in this regard. 

  • The company is immensely proud of its motivated sales force, which is well-trained and positioned to deliver.

CTAS Stock Risks

  • The labor environment continues to pose a challenge. Higher wages and incentives are required to retain staff.

  • A broader economic downturn could slow demand for Cintas' products and services.

Is CTAS Stock a Good Investment?

Cintas is a solid company with a strong track record, impressive growth, and a dividend yield. Its financial metrics are at the high end, as is to be expected for a stock that's outperforming its peers.

For existing CTAS shareholders, it's probably wise to hold, but as there are many headwinds facing the markets today, it may be better to wait for a lower price point to buy shares in CTAS. Nevertheless, for investors with a long time horizon, Cintas seems like a good company that is likely to weather the storm. 

The Cintas AGM is scheduled for Tuesday, October 25, 2022.

If you enjoyed our Cintas Corp coverage, you may be interested in our recent Daily Stock Watch articles or our IPO coverage.

Explore more on these topics:

Share:

IMPORTANT NOTICE AND DISCLAIMER

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Kirsteen Mackay does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Kirsteen Mackay has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.

Sign up for Investing Intel Newsletter