Post Earnings Coverage as Cintas’ Quarterly Revenue Climbed 5.3%

Upcoming AWS Coverage on SYNNEX Post-Earnings Results

LONDON, UK / ACCESSWIRE / April 4, 2017 / Active Wall St. announces its post-earnings coverage on Cintas Corp. (NASDAQ: CTAS). The Company announced its third quarter fiscal 2017 financial results on March 22, 2017. The uniform rental Company surpassed top- and bottom-line expectations. Register with us now for your free membership at:

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One of Cintas’s competitors within the Business Services space, SYNNEX Corp. (NYSE: SNX), announced on March 13, 2017, that it will release its financial results for the fiscal Q1 ended February 28, 2017 after the market close on Monday, March 27, 2017. An earnings call will be held to discuss the financial results for the quarter at 5:00 p.m. ET hosted by SYNNEX’s executive. AWS will be initiating a research report on SYNNEX in the coming days.

Today, AWS is promoting its earnings coverage on CTAS; touching on SNX. Get our free coverage by signing up to:

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Earnings Reviewed

For the three months ended February 28, 2017, Cintas reported revenue of $1.281 billion, an increase of 5.3% on a y-o-y basis. The organic growth rate, which adjusts for the impacts of acquisitions, foreign currency exchange rate fluctuations and differences in the number of workdays, was 6.5%. The Company’s revenue numbers surpassed market estimates of $1.279 billion.

For Q3 FY17, Cintas’ gross margin improved to 44.2% compared to 43.1% in Q3 FY16. The Company recorded its 14th consecutive quarter of year-over-year gross margin improvement. The First Aid and Safety Services segment’s third quarter gross margin improved to 44.8%, an increase of 260 basis points compared to Q3 FY16 primarily due to the realization of synergies from the acquisition of ZEE Medical in fiscal 2016.

Cintas’ operating income for Q3 FY17 was $195 million, up 0.9% on a y-o-y basis. The Company’s operating income margin was 15.2% in the reported quarter compared to 15.9% in the year earlier comparable quarter. The Company’s reported quarter operating income included $9 million, or 0.7% of revenue, of transaction expenses related to the acquisition of G&K.

For Q3 FY17, Cintas’ net income and earnings per diluted share (EPS) from continuing operations were $119 million and $1.08, respectively, compared to $117.3 million, or $1.05 per share, in the year-earlier same quarter. The reported quarter’s EPS includes a positive impact from a change in the accounting for equity compensation as required under ASU 2016-09, which was adopted in Q1 FY17 as well as a negative impact from transaction expenses such as legal and professional expenses associated with the regulatory review related to the acquisition of G&K. The Company’s adjusted earnings for the reported quarter were $1.11 per share, which surpassed analysts’ consensus by $0.05 per share.

Segment Results

Cintas’ Uniform Rental and Facility Services revenue was $993 million in Q3 FY17, up 6.1% compared on a y-o-y basis. Excluding the impact of foreign currency exchange rate changes, acquisitions, and workday differences, the segment’s organic growth rate was 7.3%. Gross margin for the Uniform Rental and Facility Services segment improved to 45.0%, an increase of 100 basis points compared to the year ago corresponding period.

During Q3 FY17, Cintas’ First Aid and Safety Services operating segment’s revenue was $124 million, 4.4% higher compared to year ago comparable period. On an organic basis, the growth rate for this segment was 5.5%.

Cintas’ fire protection services and direct sale businesses are reported in the All Other category. All Other revenue was $163 million, an increase of 1.9% on a y-o-y basis. The organic growth rate was 2.4%. All Other gross margin was 39.1% for the reported quarter compared to 38.9% for the prior year’s same period.

Balance Sheet

Cintas’ cash balances as of February 28, 2017, were $147 million and the Company had no marketable securities as of quarter end. Cash flow from operating activities in the reported quarter was $182 million and free cash flow was about $119 million. Cintas ‘capital expenditures for Q3 FY17 were approximately $63 million. As of February 28, the Company’s total debt was about $1.1 billion, consisting of $399 million in short-term debt and $745 million of long-term debt.

Completion of Acquisition

On March 21, 2017, Cintas announced the completion of the previously announced acquisition of G&K Services, Inc. for approximately $2.2 billion, including acquired net debt. G&K Services’ shareholders previously voted to approve the transaction at G&K Services’ annual meeting of shareholders held on November 15, 2016. The combined Company is expected to have annual revenues in excess of $6 billion and will serve over one million business customers. Cintas anticipates realizing annual synergies in the range of $130 million to $140 million. These synergies are expected to be realized in their entirety in the fourth full year after closing.

Stock Performance

At the close of trading session on Monday, April 03, 2017, Cintas’ share price finished yesterday’s trading session at $124.75, slipping 1.41%. A total volume of 689.14 thousand shares exchanged hands, which was higher than the 3 months average volume of 564.85 thousand shares. The stock has rallied 12.22% and 42.12% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 7.95%. The stock is trading at a PE ratio of 26.90 and has a dividend yield of 0.84%.

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