Cintas Trades Higher After Q1 Print: 3 Takes From The Street

Workplace uniform maker Cintas Corporation CTAS reported first-quarter results Tuesday that were interpreted differently by three Street analysts.

The Analysts

Stifel analyst Shlomo Rosenbaum maintained a Hold rating on Cintas with a price target lifted from $226 to $256.

Credit Suisse analyst Kevin McVeigh maintained at Neutral, price target lifted from $195 to $225.

Morgan Stanley analyst Toni Kaplan maintained at Underweight, price target lifted from $202 to $217.

Stifel: The Good And Bad

Cintas' earnings report shows that it continues to benefit from new contract wins, pricing power, G&K synergies in the uniforms business and momentum in safety-related sales, Rosenbaum said in a Tuesday note.

The analyst's positive takeaways from the quarter include:

• A very strong organic revenue growth rate of 8.3%.
• Revenue beat Street estimates by $19 million.
• EBIT margin of 16.9% was better than expected.
• EPS beat Street estimates by 17 cents.
• Free cash flow of $212.2 million was $25 million higher than expected.
• Management lifted its EPS outlook range again.
• The company bought back $193.1 million worth of shares in the quarter.

Rosenbaum named two negatives:

• Revenue in uniform rentals was a "tad lighter" than expected at $8.4 million.
• EBIT margins in the first aid and safety and "other" segments were each 20 basis points lower than expected.

Credit Suisse: Macro Risks Remain

Cintas' first-quarter print was highlighted by a modest revenue beat, while gross margin expansion of 140 basis points was modestly offset by higher-than-expected SG&A, McVeigh said in a Tuesday note.

Looking forward, the company lifted its revenue guidance range, but its revised EPS was smaller than the first-quarter beat, the analyst said. 

Cintas continues to face potential headwinds, including a slowdown in full-time employment, elevated wage or input cost pressures and more competition, according to Credit Suisse. 

Morgan Stanley: Unjustified Multiple

Cintas reported a "modestly positive" report, and its reputation of beat-and-raise quarters remains unchanged, Kaplan said in a Wednesday note.

The company is benefiting from the stable macro environment, which implies a premium stock multiple is not warranted, the analyst said. 

The stock is trading at a 70% premium P/E multiple to the S&P 500, which is "full," he said. 

The company conveyed an "incrementally more cautious" stance compared to prior quarters due to tariffs, interest rates and the 2020 presidential election, according to Morgan Stanley. 

Price Action

Cintas shares were trading higher by 5.82% at $266.82 at the time of publication.

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