Cintas Corp. (CTAS 202.66, +8.98, +4.64%) is trading nicely higher after reporting Q4
(May) earnings last night. Cintas is the largest supplier of work uniforms in
the US (shirts, jackets, pants, footwear etc.). It makes some sales but provides
uniforms primarily on a rental basis. Customers range from McDonald's to
Starbucks to W Hotels to beyond hospitality. The stock has been on a steady rise over the
past year, trading above $200 today for the first time ever. CTAS was also added
to the Fortune 500 in FY18.
Cintas provides more durable uniforms for mechanics and fire-resistant uniforms for first responders and for workers on oil & gas rigs. Cintas provides its products and services via its distribution network and local delivery routes or local reps. In addition to uniforms, Cintas also provides related business services, including entrance mats, restroom cleaning services and supplies, carpet and tile cleaning services, and first aid, safety and fire protection products.
In 2017, Cintas closed on a major acquisition when it bought rival G&K Services for a total enterprise value of approximately $2.2 bln, including acquired net debt. G&K Services added annual revenue of approximately $1 bln.
Turning to the 4Q18 (May) results, adjusted EPS rose 42% year/year to $1.77 while revenue rose 9.1% year/year to $1.67 bln. Both results were above market expectations with EPS being well above. In terms of guidance for FY19, Cintas sees non-GAAP EPS of $7.00-7.15 and revenue of $6.75-6.82 bln, both in-line with market expectations. In terms of margins, adjusted operating margin improved to 16.8% from 15.8% in the prior year period.
Cintas says it continued to make substantial progress on two significant investments. The first is the acquisition of G&K. Cintas has now closed nearly all operations necessary to eliminate redundancies, which is 63 operations to date. Also, all G&K operations have been converted to Cintas operating systems. The second is the implementation of an ERP system. Cintas converted 29 more operations to the new system in MayQ, for a total of 108 so far, which is 34% of the total including G&K operations.
In sum, this was a nice quarter and guidance for Cintas. Cintas is benefiting from a strong overall economy and the fact that the unemployment rate has been falling.
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