10 Beat And Raise Quarters In A Row For Cintas
A day after Cintas Corporation (NASDAQ: CTAS) delivered a beat and raise quarter for the tenth time in a row, Barclays reiterated its Overweight rating and $130 target price for the company's shares. This implied an over 12 percent upside potential from the current levels.
Analyst Manav Patnaik pointed out that Cintas' EPS could beat because of gains from new accounting rules, better-than-expected SAP launch progress and better margins. Although organic revenue growth slowed down from 6.7 percent in the fourth quarter to 5.7 percent in the first quarter, rentals managed to withstand the Energy headwinds to remain at 6 percent levels.
The brokerage expects Cintas to improve its First Aid performance in the remainder period of the current fiscal year driven by Zee Medical.
In a research note to clients, the analyst said, "In the current low growth macro (where peers expect 2 percent core growth from industrials in 2017), we position CTAS as a premium 'Industrials' idea, due to its strong CFs & consistent capital returns but mainly because of its reliable MSD+ growth despite cyclical pressures."
Barclays also expect Cintas to gain from GK acquisition citing the revenue outlook of $130–$140 million in "Year 4 as classic CTAS conservatism."
While admitting that the stock is not going cheap, the brokerage viewed that Cintas deserve premium valuation citing that it is more like 23x cash EPS. The firm thinks that low- to mid-20s multiple as fair.
At time of publication, Cintas was up 2.42 percent at $116.17.
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