Cintas (CTAS) Remains Bullish with Healthy Organic Growth

On Mar 24, Zacks Investment Research updated the research report on business services provider Cintas Corporation CTAS.

Cintas provides specialized services to all types of businesses throughout North America. The company designs and manufactures corporate identity uniform programs, and provides entrance mats, restroom supplies, promotional products and first aid and safety products for diversified businesses.

Cintas aims to continually achieve revenue build-up by increasing penetration levels at existing customers and broadening the customer base to include fresh business segments. The company also identifies additional product and service opportunities for its current and future customers to expand its portfolio. To ensure solid organic revenue growth through new account sales, the company regularly provides advanced training to the sales force. Its team of skilled service professionals frequently visit customers, thus strengthening personal relationships, and facilitating a platform to launch additional products and services. This focused approach for steady top-line growth is commendable.

The company recently recorded strong third-quarter fiscal 2016 results on the back of healthy organic growth. Net income from continuing operations was $117.3 million or $1.05 per share compared with $100.3 million or 85 cents per share in the year-earlier quarter. The healthy year-over-year increase in earnings was primarily attributable to solid top-line growth. The reported earnings for the quarter comfortably beat the Zacks Consensus Estimate by 10 cents.

Quarterly revenues increased 9.7% year over year to $1,216.1 million and exceeded the Zacks Consensus Estimate of $1,202 million. Organic growth for the reported quarter improved 6.8% year over year. The superior top-line performance was largely driven by the addition of newer customers, higher product prices and greater penetration of existing customers through better and innovative products and services.

Buoyed by the healthy third-quarter fiscal 2016 results, Cintas revised its guidance for the fiscal year. The company expects fiscal 2016 revenues in the range of $4.860 billion to $4.890 billion, up 8.6%–9.2% year over year. Earnings from continuing operations are expected to be within $3.98–$4.03 per share, which represents a year-over-year improvement of 18.8%–20.3%.

We remain encouraged with the strong quarterly performance and bullish guidance of this Zacks Rank #3 (Hold) stock. Other stocks in the industry worth reckoning include The Hackett Group, Inc. HCKT and Exponent Inc. EXPO, both carrying a Zacks Rank #2 (Buy) and CBIZ, Inc. CBZ, sporting a Zacks Rank #1 (Strong Buy).

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