Cintas Corporation (CTAS) on Q2 2023 Results - Earnings Call Transcript
Operator: Good day, everyone, and welcome to the Cintas Second Quarter Fiscal Year 2023 Earnings Release Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Paul Adler, Vice President, Treasurer and Investor Relations. Please go ahead, sir. Paul Adler: Thanks, Russ, and thank you for joining us. With me is Todd Schneider, President and Chief Executive Officer; and Mike Hansen, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2023 second quarter results. After our commentary, we will open the call to questions from analysts. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor from civil litigation for forward-looking statements. This conference call contains forward-looking statements that reflect the company's current views as to future events and financial performance. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. I refer you to the discussion on these points contained in our most recent filings with the Securities and Exchange Commission. I'll now turn the call over to Todd. Todd Schneider: Thank you, Paul. Second quarter total revenue grew 13.1% to $2.17 billion. Each of our businesses increased revenue at a double-digit rate. The benefits of our strong revenue growth flowed through to our bottom line. Operating income margin increased 70 basis points to 20.5% and diluted EPS grew 13% to $3.12. I thank our employees whom we call partners for their continued focus on our customers, our shareholders and each other. Uniform Rental and Facility Services operating segment revenue for the second quarter of fiscal '23 was $1.71 billion compared to $1.54 billion last year. The organic revenue growth rate was 11.3%. Revenue growth was driven mostly from increased volume. Our sales force continues to add new customers and penetrate and cross-sell our existing customer base. Businesses prioritize all we provide including image, safety, cleanliness and compliance. Challenge with labor scarcity and rising costs, businesses continue to turn to Cintas to help them get ready for the workday. Additionally, price increases contributed at a higher level than historically. We believe such a mix of revenue drivers, volume and price is healthy and supportive of continued long-term growth. Our First Aid and Safety Services operating segment revenue for the second quarter was $236.0 million compared to $202.2 million last year. The organic revenue growth rate was 15.1%. This rate reflects the continued momentum of our First Aid cabinet business, which continues to grow more than 20%. Whether it is COVID-19 or influenza, the health and safety of employees remains top-of-mind. We provide businesses with access to quick and effective products and services that promote health and well-being in workplace. Personal Protective Equipment or PPE, while still elevated compared to pre-COVID levels, declined slightly on a sequential basis. The revenue mix-shift benefits our financial results because the cabinet service is a more consistent revenue stream and has higher profit margins than PPE. Our Fire Protection Services and Uniform Direct Sale businesses are reported in the All Other segment. All Other revenue was $228.9 million compared to $184.9 million last year. The Fire business organic revenue growth rate was 18.0% and the Uniform Direct Sale business organic growth rate was 33.9%. Before turning the call over to Mike to provide details of our second quarter results, I'll provide our updated financial expectations for fiscal year. We are increasing our financial guidance. We are raising our annual revenue expectations from a range of $8.58 billion to $8.67 billion to a range of $8.67 billion to $8.75 billion, a total growth rate of 10.4% to 11.4%. Also, we are raising our annual diluted EPS expectations from a range of $12.30 to $12.65 to a range of $12.50 to $12.80, a growth rate of 10.8% to 13.5%. Mike? Mike Hansen: Thanks, Todd, and good morning. Our fiscal 2023 second quarter revenue was $2.17 billion compared to $1.92 billion last year. The organic revenue growth rate adjusted for acquisitions, divestitures and foreign currency exchange rate fluctuations was 12.8%. Gross margin for the second quarter of fiscal '23 was $1 billion compared to $885.1 million last year, an increase of 15.5%. Gross margin as a percent of revenue was 47% for the second quarter of fiscal '23 compared to 46% last year. Energy expenses comprised of gasoline, natural gas and electricity were a headwind, increasing 10 basis points from last year. Strong volume growth from new customers and the penetration of existing customers with more products and services helped generate great operating leverage. Gross margin percentage by business was 47% for Uniform Rental and Facility Services. 50.5% for First Aid and Safety Services. 47.4% for Fire Protection Services, and 37.2% for Uniform Direct Sale. Operating income of $444.9 million compared to $381.2 million last year. Fiscal '23 second quarter operating income increased 16.7% and operating income margin increased 70 basis points to 20.5% from 19.8% last year. Our effective tax rate for the second quarter was 22.1% compared to 18% last year. The tax rate can move from period-to-period based on discrete events, including the amount of stock compensation expense. Net income for the second quarter was $324.3 million compared to $294.7 million last year, an increase of 10.1%. This year's diluted EPS of $3.12 compared to $2.76 last year, an increase of 13%. We had to overcome higher inflation, interest expense and tax rate, therefore we are especially pleased with these financial results. Cash flow remains strong on September 15th, 2022. We declared dividends and pay them on December 15th, 2022 in the amount of $117.4 million in quarterly dividends. To provide our annual -- Todd provided our annual financial guidance related to the guidance. Please note the following. Fiscal '22 included a gain on sale of operating assets in the first quarter and a gain on an equity method investment in the third quarter. Excluding these items, fiscal '22 operating income was $1.55 billion, a margin of 19.7% and diluted EPS was $11.28. Please see the table in our earnings press release for more information. Fiscal '23 operating income is expected to be in the range of $1.75 billion to $1.79 billion compared to $1.55 billion in fiscal '22 after excluding the gains. Fiscal '23 interest expense is expected to be $113 million compared to $88.8 million in fiscal '22 due in part to higher interest rates. Our fiscal '23 effective tax rate is expected to be 20.7%. This compares to a rate of 17.9% in fiscal '22 after excluding the gains and their related tax impacts. Please keep the following in mind when modeling third quarter versus fourth quarter financial results. The number of work days in the third and fourth quarter of fiscal '23 are unchanged from fiscal '22. There are 64 days in the third quarter and 66 days in the fourth. Less work days results in less revenue to cover certain fixed and amortizing costs. In last year's third quarter, First Aid and Safety sold about $15 million in COVID test kits. We don't expect that revenue to repeat this year. Uniform Direct Sale organic revenue growth rates have been very strong year-to-date, however we expect these rates to be pressured in the second half of the fiscal year as the business faces increasingly challenging comparisons. Payroll taxes reset in our fiscal third quarter, increasing our SG&A costs on a sequential basis. Our financial guidance does not include the impact of any future share buybacks and we remain in a dynamic environment that can continue to change. Our guidance contemplates a stable economy and excludes pandemic related setbacks or economic downturns. I'll turn it back over to Paul. Paul Adler: That concludes our prepared remarks. Now we are happy to answer questions from the analysts. Please ask just one question and a single follow-up if needed. Thank you. Operator: [Operator Instructions] And our first question comes from Faiza Alwy from Deutsche Bank Securities. Please go ahead, Faiza. Operator: And our next question comes from Ashish Sabadra from RBC. Please go ahead, Ashish. Operator: Our next question comes from George Tong from Goldman Sachs. Please go ahead, George. Operator: And our next question comes from Andy Wittmann from R.W. Baird. Please go ahead, Andy. Operator: And our next question comes from Tim Mulrooney from William Blair. Please go ahead, Tim. Operator: And our next question comes from Manav Patnaik from Barclays. Please go ahead, Manav. Operator: Our next question comes from Andrew Steinerman from JPMorgan Securities. Please go ahead, Andrew. Operator: And our next question comes from Heather Balsky from Bank of America. Please go ahead, Heather. Operator: Our next question comes from Kartik Mehta from Northcoast Research. Please go ahead, Kartik. Operator: And our next question comes from Seth Weber from Wells Fargo Securities. Please go ahead, Seth. Operator: Our next question comes from Shlomo Rosenbaum from Stifel Nicolaus. Please go ahead, Shlomo. Operator: Our next question comes from Scott Schneeberger from Oppenheimer. Please go ahead, Scott. Operator: And our next question comes from Toni Kaplan from Morgan Stanley. Please go ahead, Toni. Operator: And at this time there are no further questions. I would like to turn the call back to Paul for closing remarks. Paul Adler: All right. Well thank you for joining us this morning. We will issue our third quarter of fiscal '23 financial results in late March and we look forward to speaking with you again at that time. Take care. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Cintas Corporation (NASDAQ:CTAS) Surpasses Earnings and Revenue Estimates
- Cintas Corporation (NASDAQ:CTAS) reported an earnings per share (EPS) of $1.20, surpassing the estimated $1.19.
- The company's revenue reached approximately $2.72 billion, exceeding the forecast and marking an 8.7% increase year-over-year.
- Cintas showcases strong financial metrics with a price-to-earnings (P/E) ratio of approximately 44.63 and a current ratio of approximately 2.09.
Cintas Corporation, listed on the NASDAQ as CTAS, is a prominent player in the business services industry. The company specializes in providing corporate identity uniforms, facility services, and first aid and safety products. Cintas competes with other service providers like Aramark and UniFirst. The company has consistently demonstrated strong financial performance, as evidenced by its recent earnings report.
On September 24, 2025, Cintas reported earnings per share (EPS) of $1.20, surpassing the estimated $1.19. This marks a notable improvement from the $1.10 EPS reported in the same quarter last year. The earnings surprise for this quarter was +0.84%, continuing a trend of exceeding consensus EPS estimates over the past four quarters. In the previous quarter, Cintas also outperformed expectations with an EPS of $1.09 against an anticipated $1.07, resulting in a +1.87% surprise.
Cintas reported actual revenue of approximately $2.72 billion, exceeding the estimated $2.70 billion. This represents an 8.7% increase compared to the $2.50 billion revenue in the same quarter last year. The revenue growth was positively influenced by acquisitions, contributing 0.9% to the increase. Cintas has consistently outperformed consensus revenue estimates in the last four quarters, showcasing its robust growth across various segments.
The company's financial metrics reflect its strong market position. Cintas has a price-to-earnings (P/E) ratio of approximately 44.63, indicating that investors are willing to pay $44.63 for every dollar of earnings. The price-to-sales ratio stands at about 7.81, suggesting that investors are paying $7.81 for every dollar of sales. The enterprise value to sales ratio is around 8.04, reflecting the company's total valuation relative to its sales.
Cintas maintains a moderate level of debt with a debt-to-equity ratio of 0.57. The company also has a current ratio of approximately 2.09, indicating a strong ability to cover its short-term liabilities with its short-term assets. The enterprise value to operating cash flow ratio is approximately 38.40, providing insight into the company's valuation in relation to its cash flow. The earnings yield is about 2.24%, offering a perspective on the return on investment.
Cintas Lifts Outlook After Q3 Beat, Shares Surge 7%
Cintas (NASDAQ:CTAS) shares rose around 7% intra-day on Wednesday after the company raised its full-year earnings and revenue forecast on the back of a strong fiscal third-quarter performance that topped Wall Street estimates.
The company reported earnings per share of $1.13, beating the analyst consensus of $1.05, while revenue came in at $2.61 billion, slightly above the $2.6 billion expected.
A key highlight was gross margin improvement to 50.6%, up from 49.4% a year ago and ahead of the 50% estimate, showcasing the company’s operational strength and pricing discipline.
Cintas also upgraded its fiscal 2025 earnings guidance, now expecting EPS between $4.36 and $4.40, up from its previous range of $4.28 to $4.34, and ahead of the $4.33 Street forecast.
The company nudged its revenue forecast slightly higher, projecting full-year sales between $10.28 billion and $10.31 billion, compared to the previous $10.25 billion to $10.32 billion range. Analysts were looking for $10.32 billion.
Cintas Lifts Outlook After Q3 Beat, Shares Surge 7%
Cintas (NASDAQ:CTAS) shares rose around 7% intra-day on Wednesday after the company raised its full-year earnings and revenue forecast on the back of a strong fiscal third-quarter performance that topped Wall Street estimates.
The company reported earnings per share of $1.13, beating the analyst consensus of $1.05, while revenue came in at $2.61 billion, slightly above the $2.6 billion expected.
A key highlight was gross margin improvement to 50.6%, up from 49.4% a year ago and ahead of the 50% estimate, showcasing the company’s operational strength and pricing discipline.
Cintas also upgraded its fiscal 2025 earnings guidance, now expecting EPS between $4.36 and $4.40, up from its previous range of $4.28 to $4.34, and ahead of the $4.33 Street forecast.
The company nudged its revenue forecast slightly higher, projecting full-year sales between $10.28 billion and $10.31 billion, compared to the previous $10.25 billion to $10.32 billion range. Analysts were looking for $10.32 billion.
Cintas Corporation (NASDAQ:CTAS) Maintains Strong Financial Performance Despite "Underweight" Rating
- Wells Fargo maintains an "Underweight" rating for Cintas Corporation (NASDAQ:CTAS), adjusting its price target slightly.
- Cintas reports a 7.1% year-over-year increase in organic revenues, leading to an improved EPS outlook.
- The stock price of Cintas has seen a slight increase, reflecting its market volatility and investor interest.
Cintas Corporation (NASDAQ:CTAS) is a leading provider of corporate identity uniforms and related business services. On December 20, 2024, Wells Fargo maintained its "Underweight" rating for Cintas, suggesting caution to investors. The stock was held at a price of $183.09, and Wells Fargo adjusted its price target from $191 to $184, as highlighted by TheFly.
Despite Wells Fargo's cautious stance, Cintas reported strong financial performance in its second-quarter fiscal 2025 results. The company achieved a 7.1% year-over-year increase in organic revenues, driven by robust sales across its segments. This growth led to an upward revision in its earnings per share (EPS) outlook, indicating improved profitability.
The stock price for Cintas has seen a slight increase, currently priced at $186.06, up by approximately 1.79% or $3.27. The stock has experienced fluctuations, with a low of $181.15 and a high of $186.15 today. Over the past year, Cintas has reached a high of $228.12 and a low of $143.64, reflecting its volatility.
Cintas has a market capitalization of approximately $75.04 billion, indicating its significant size in the market. The trading volume on the NASDAQ exchange is 1,262,531 shares, showing active investor interest. Despite the "Underweight" rating, the company's strong financial performance may attract investors looking for growth opportunities.
Cintas Corporation (NASDAQ:CTAS) Maintains Strong Financial Performance Despite "Underweight" Rating
- Wells Fargo maintains an "Underweight" rating for Cintas Corporation (NASDAQ:CTAS), adjusting its price target slightly.
- Cintas reports a 7.1% year-over-year increase in organic revenues, leading to an improved EPS outlook.
- The stock price of Cintas has seen a slight increase, reflecting its market volatility and investor interest.
Cintas Corporation (NASDAQ:CTAS) is a leading provider of corporate identity uniforms and related business services. On December 20, 2024, Wells Fargo maintained its "Underweight" rating for Cintas, suggesting caution to investors. The stock was held at a price of $183.09, and Wells Fargo adjusted its price target from $191 to $184, as highlighted by TheFly.
Despite Wells Fargo's cautious stance, Cintas reported strong financial performance in its second-quarter fiscal 2025 results. The company achieved a 7.1% year-over-year increase in organic revenues, driven by robust sales across its segments. This growth led to an upward revision in its earnings per share (EPS) outlook, indicating improved profitability.
The stock price for Cintas has seen a slight increase, currently priced at $186.06, up by approximately 1.79% or $3.27. The stock has experienced fluctuations, with a low of $181.15 and a high of $186.15 today. Over the past year, Cintas has reached a high of $228.12 and a low of $143.64, reflecting its volatility.
Cintas has a market capitalization of approximately $75.04 billion, indicating its significant size in the market. The trading volume on the NASDAQ exchange is 1,262,531 shares, showing active investor interest. Despite the "Underweight" rating, the company's strong financial performance may attract investors looking for growth opportunities.
New Price Target for Cintas Corporation (NASDAQ:CTAS) Suggests Notable Upside
- Jasper Bibb of Truist Financial has set a new price target for Cintas Corporation (NASDAQ:CTAS) at $225, indicating a potential upside of approximately 10.42%.
- Cintas has demonstrated resilience and growth, with a strong market presence and a remarkable earnings surprise history, suggesting it could surpass earnings estimates in its upcoming report.
- The company's solid financial performance and the optimistic outlook by analysts highlight its potential for continued growth and investment appeal.
Jasper Bibb of Truist Financial has recently set a new price target for Cintas Corporation (NASDAQ:CTAS) at $225, suggesting a potential upside of approximately 10.42% from its current trading price of $203.77. This optimistic outlook is noteworthy, especially considering the company's recent trading performance and its strong position in the market. Cintas, known for its corporate uniform rental services, has shown resilience and growth potential amidst varying market conditions, making it a company of interest for investors and analysts alike.
The company's recent trading activity reveals a slight decrease of $1.18 in its stock price, marking a change of about -0.58%. Despite this minor dip, Cintas has demonstrated significant growth over the past year, with its stock price reaching a peak of $209.12 and a low of $118.69. This volatility highlights the company's ability to navigate through market fluctuations while maintaining a strong market presence. With a market capitalization of $82.17 billion and a trading volume of 1,148,915 shares, Cintas stands as a substantial player in its industry.
The optimism surrounding Cintas is further bolstered by its remarkable earnings surprise history. Analysts at Zacks Investment Research have pointed out that the company is in a strong position to surpass earnings estimates in its upcoming quarterly report. This confidence is rooted in Cintas possessing two key ingredients essential for outperforming expectations. Such a consistent track record of exceeding earnings estimates not only reflects the company's operational efficiency but also its ability to adapt and thrive in varying economic conditions.
Given the company's solid financial performance and the potential for continued growth, the new price target set by Jasper Bibb seems well-founded. The combination of Cintas's strong market position, its ability to surpass earnings estimates, and its overall financial health presents a compelling case for the potential upside in its stock price. As the company prepares for its upcoming quarterly report, investors and analysts alike will be keenly watching to see if Cintas can continue its trend of exceeding expectations, further justifying the optimistic outlook on its stock.
New Price Target for Cintas Corporation (NASDAQ:CTAS) Suggests Notable Upside
- Jasper Bibb of Truist Financial has set a new price target for Cintas Corporation (NASDAQ:CTAS) at $225, indicating a potential upside of approximately 10.42%.
- Cintas has demonstrated resilience and growth, with a strong market presence and a remarkable earnings surprise history, suggesting it could surpass earnings estimates in its upcoming report.
- The company's solid financial performance and the optimistic outlook by analysts highlight its potential for continued growth and investment appeal.
Jasper Bibb of Truist Financial has recently set a new price target for Cintas Corporation (NASDAQ:CTAS) at $225, suggesting a potential upside of approximately 10.42% from its current trading price of $203.77. This optimistic outlook is noteworthy, especially considering the company's recent trading performance and its strong position in the market. Cintas, known for its corporate uniform rental services, has shown resilience and growth potential amidst varying market conditions, making it a company of interest for investors and analysts alike.
The company's recent trading activity reveals a slight decrease of $1.18 in its stock price, marking a change of about -0.58%. Despite this minor dip, Cintas has demonstrated significant growth over the past year, with its stock price reaching a peak of $209.12 and a low of $118.69. This volatility highlights the company's ability to navigate through market fluctuations while maintaining a strong market presence. With a market capitalization of $82.17 billion and a trading volume of 1,148,915 shares, Cintas stands as a substantial player in its industry.
The optimism surrounding Cintas is further bolstered by its remarkable earnings surprise history. Analysts at Zacks Investment Research have pointed out that the company is in a strong position to surpass earnings estimates in its upcoming quarterly report. This confidence is rooted in Cintas possessing two key ingredients essential for outperforming expectations. Such a consistent track record of exceeding earnings estimates not only reflects the company's operational efficiency but also its ability to adapt and thrive in varying economic conditions.
Given the company's solid financial performance and the potential for continued growth, the new price target set by Jasper Bibb seems well-founded. The combination of Cintas's strong market position, its ability to surpass earnings estimates, and its overall financial health presents a compelling case for the potential upside in its stock price. As the company prepares for its upcoming quarterly report, investors and analysts alike will be keenly watching to see if Cintas can continue its trend of exceeding expectations, further justifying the optimistic outlook on its stock.
