Cintas (CTAS) To Report Q1 Earnings: What's In The Cards?
Zacks Investment Research | Sep 22, 2017 08:07AM ET
Leading business service provider Cintas Corporation (NASDAQ:CTAS) is scheduled to report first-quarter fiscal 2018 results after the closing bell on Sep 26. In the last reported quarter, its adjusted earnings beat the Zacks Consensus Estimate by 10 cents. Let’s see how things are shaping up for this announcement.
Key Factors to Consider
Cintas has completed the acquisition of rival, G&K Services Inc. With annual revenues of approximately $1 billion, G&K Services has over 170,000 customers in the United States and Canada. The successful integration of G&K Services is likely to expand Cintas’ customer profile and augment its revenues. The combined company is expected to cater to over one billion business customers with an extended product portfolio and additional processing capacity.
Customer service is also likely to improve with increased route density. The synergies from the combined operations are expected to yield $130 million to $140 million in cost savings and the transaction is anticipated to be accretive to Cintas’ earnings in the full year of its operation.
Furthermore, Cintas recorded industry leading revenue growth over the past few quarters with continued focus on core businesses. New business wins, deeper penetration of existing customers with more products and services and customer retention remain key strengths of the company. In addition, Cintas also identifies additional product and service opportunities for its current and future customers to expand its portfolio. This focused approach for steady top-line growth is likely to reap benefits in the to-be-reported quarter as well.
Cintas has a strong balance sheet with adequate liquidity to meet its working capital requirements. Over the years, the company has consistently returned significant cash to its shareholders through dividends and share repurchases. Its investment strategy takes a holistic view of the rapidly evolving market and deploys a dynamic capital allocation approach to focus on the relative value of the various sectors within the broader industry.
However, a persistently challenging macroeconomic environment has mostly driven customers to perform certain in-house services themselves instead of outsourcing them to Cintas. This is expected to result in some loss of businesses. In addition, significant international operations expose it to risks of fluctuation in foreign exchange rates, which in turn is likely to impact its financial results.
Earnings Whispers
Our proven model does not conclusively show that Cintas is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP Filter .
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Cintas Corporation Price and EPS Surprise
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