Cintas (CTAS) Q3 2025 Earnings Call March 26, 2025 10:00 AM ET Company Participants Jared Mattingley - VP, Treasurer, Investor Relations & Corporate ControllerTodd M. Schneider - President and CEOJ. Michael Hansen - Executive Vice President & CFOJasper Bibb - Equity Research AssociateRonan Kennedy - Vice PresidentLuke McFadden - Equity Research AssociateJustin Hauke - Vice President and Senior Research AssociateDavid Paige - AVP - Equity ResearchScott Schneeberger - Managing DirectorShlomo Rosenbaum - Manag ...

Financial Performance - Revenue for Q3 fiscal 2025 was $2.61 billion, an increase of 8.4% from $2.41 billion in Q3 fiscal 2024[2] - Gross margin for Q3 fiscal 2025 was $1.32 billion, up 11.1% from $1.19 billion in the same quarter last year, representing 50.6% of revenue[3] - Operating income increased 17.1% to $609.9 million, with an operating margin of 23.4% compared to 21.6% in Q3 fiscal 2024[4] - Net income for Q3 fiscal 2025 was $463.5 million, a 16.6% increase from $397.6 million in Q3 fiscal 2024[5] - Diluted earnings per share (EPS) rose 17.7% to $1.13 from $0.96 in the prior year[5] - Total revenue for the nine months ended February 28, 2025, was $7,672,529, representing a 7.7% increase from $7,125,680 in the same period of 2024[19] - Net income increased by 17.9% to $1,364,025 for the nine months ended February 28, 2025, compared to $1,157,277 for the same period in 2024[19] - Basic earnings per share rose by 19.1% to $3.37, up from $2.83 in the prior year[19] - Operating income for the nine months ended February 28, 2025, increased by 15.9% to $1,762,274 from $1,521,039 in the prior year[19] - The company reported a total gross margin of 50.2% for the nine months ended February 28, 2025, compared to 48.7% for the same period in 2024[21] Revenue Expectations - The company updated its annual revenue expectations to a range of $10.280 billion to $10.305 billion, reflecting a slight reduction due to foreign currency impacts[7] - The organic revenue growth rate for Q3 fiscal 2025 was 7.9%, with the low end of the organic growth rate expectations raised from 7.0% to 7.4%[7] - Organic revenue growth for the nine months ended February 28, 2025, was 7.7%, reflecting strong performance excluding acquisitions and foreign currency impacts[27] Cash Flow and Dividends - Free cash flow for the nine months ended February 28, 2025, was $1,235,896, an increase from $1,079,183 in the same period of 2024[25] - Cintas paid a quarterly dividend of $158.1 million, an increase of 14.9% from the previous year[6] - Dividends paid increased to $453,703, compared to $393,310 in the previous year, representing a rise of 15.4%[32] Assets and Equity - Total current assets as of February 28, 2025, were $3,341,428, up from $3,185,207 as of May 31, 2024[30] - The total shareholders' equity increased to $4,592,248 as of February 28, 2025, from $4,316,372 as of May 31, 2024[30] Expenses and Investments - Interest expense for fiscal 2025 is expected to be approximately $100.0 million, up from $95.0 million in fiscal 2024[12] - Capital expenditures for the period were $294,260, a decrease from $307,558 in the previous year, indicating a reduction of 4.2%[32] - Net cash used in investing activities was $474,372, slightly improved from $503,278 in the prior year, showing a decrease of 5.7%[32] Cash and Receivables - Cash and cash equivalents at the end of the period were $243,428, compared to $128,483 at the end of the previous year, marking an increase of 89.5%[32] - Accounts receivable net change was $(158,761), worsening from $(109,040) in the prior year, indicating a decline in collection efficiency[32] Other Financial Metrics - The effective tax rate for Q3 fiscal 2025 was 21.0%, up from 19.9% in the same quarter last year[5] - The gross margin for uniform rental and facility services improved to 49.5% for the nine months ended February 28, 2025, compared to 48.1% for the same period in 2024[21] - Net cash provided by operating activities increased to $1,530,156, up from $1,386,741, reflecting a growth of 10.3%[32] - The company repurchased common stock amounting to $678,129, up from $468,146, reflecting a significant increase of 44.8%[32] - The company reported a gain on the sale of property and equipment of $23,972, which was not recorded in the previous year[32] - The effect of exchange rate changes on cash and cash equivalents resulted in a decrease of $3,790, contrasting with a gain of $341 in the previous year[32]

Financial Performance - Cintas Corporation is set to release its third-quarter financial results on March 26, with expected earnings of $1.06 per share, an increase from $0.96 per share in the same period last year [1] - The company projects quarterly revenue of $2.6 billion, up from $2.41 billion a year earlier [1] Acquisition Proposal - Cintas has ended discussions regarding its proposal to acquire UniFirst for $275 per share in cash [2] - Following the announcement, Cintas shares fell by 0.6%, closing at $193.46 [2] Analyst Ratings - Citigroup analyst Leo Carrington reinstated a Sell rating with a price target of $161 [4] - RBC Capital analyst Ashish Sabadra reiterated a Sector Perform rating with a price target of $215 [4] - Baird analyst Andrew Wittmann maintained a Neutral rating and reduced the price target from $209 to $200 [4] - Morgan Stanley analyst Toni Kaplan maintained an Equal-Weight rating and raised the price target from $185 to $202 [4] - Barclays analyst Manav Patnaik maintained an Overweight rating and increased the price target from $210 to $245 [4]

Core Viewpoint - Cintas Corporation (CTAS) is expected to report strong third-quarter fiscal 2025 results, with anticipated revenue growth driven by new customer acquisition and product penetration, despite rising costs and foreign currency headwinds [1][6][7]. Financial Performance Expectations - The total revenues for the fiscal third quarter are projected to be $2.6 billion, reflecting a year-over-year increase of 7.6% [6]. - The Uniform Rental and Facility Services segment is expected to generate revenues of $2 billion, marking a 6.9% increase from the previous year [3]. - The First Aid and Safety Services segment is anticipated to achieve revenues of $293.6 million, indicating an 11.8% growth compared to the same quarter last year [4]. - Adjusted earnings are forecasted to be $1.05 per share, representing an 8.9% increase from the year-ago quarter [6]. Operational Insights - The company is expected to see an improvement in operating margin by 70 basis points from the prior year, supported by operational execution and pricing strategies [6]. - Synergistic gains from recent acquisitions, including Paris Uniform Services and SITEX, are likely to enhance revenue and market presence [5]. Cost and Market Challenges - The company is facing rising costs in sales and SG&A expenses, with SG&A expected to increase by 7% year-over-year [7]. - Foreign currency fluctuations are anticipated to negatively impact profitability due to the company's exposure to international markets [7]. Earnings Prediction Insights - The Earnings ESP for CTAS is 0.00%, indicating no expected earnings beat, as both the Most Accurate Estimate and the Zacks Consensus Estimate are at $1.05 per share [9]. - The company currently holds a Zacks Rank of 3, suggesting a neutral outlook [9].

Core Viewpoint - Analysts forecast that Cintas (CTAS) will report quarterly earnings of $1.05 per share, reflecting a year-over-year increase of 9.4% and revenues of $2.6 billion, which is a 7.9% increase compared to the previous year [1] Revenue Estimates - Total Revenue from Uniform Rental and Facility Services is projected to be $2.02 billion, indicating a year-over-year change of +7.4% [4] - Total Revenue from Other services is expected to reach $577.81 million, showing a year-over-year change of +9.1% [4] - Revenue from All Other segments is estimated at $285.47 million, reflecting a change of +7% from the year-ago quarter [4] Operating Income Estimates - Operating income from Uniform Rental and Facility Services is anticipated to be $459.81 million, up from $420.41 million reported in the same quarter last year [5] - Operating income from First Aid and Safety Services is projected at $70.90 million, compared to $57.72 million in the same quarter of the previous year [6] - The consensus estimate for Operating income from All Other segments stands at $46.65 million, an increase from $42.68 million reported a year ago [6] Stock Performance - Over the past month, Cintas shares have recorded a return of -5.7%, while the Zacks S&P 500 composite experienced a -7.5% change [7] - Cintas holds a Zacks Rank 3 (Hold), suggesting that its performance is likely to align with the overall market in the upcoming period [7]

Company Overview - Cintas (CTAS) is a notable stock within the Business Services sector, which comprises 290 individual stocks and currently holds a Zacks Sector Rank of 7 [2] - Cintas has a Zacks Rank of 2 (Buy), indicating a positive outlook based on earnings estimates and revisions [3] Performance Analysis - Year-to-date, Cintas has returned approximately 5.2%, significantly outperforming the Business Services sector, which has an average return of -0.8% [4] - In comparison, another stock in the sector, Gorilla Technology Group Inc. (GRRR), has achieved a year-to-date return of 54.7% [4] Earnings Estimates - The Zacks Consensus Estimate for Cintas' full-year earnings has increased by 2% over the past three months, reflecting improved analyst sentiment and a stronger earnings outlook [3] - Cintas belongs to the Business - Services industry, which includes 25 individual stocks and currently ranks 158 in the Zacks Industry Rank, with an average loss of 0.6% year-to-date [5]

Group 1 - Cintas (CTAS) is a notable stock in the Business Services sector, currently outperforming the sector with a year-to-date gain of 11.3% compared to the sector average of 7.2% [4] - The Business Services group consists of 288 companies and is ranked 9 within the Zacks Sector Rank, which evaluates 16 different sector groups [2] - Cintas holds a Zacks Rank of 2 (Buy), indicating a positive analyst sentiment with a 2% increase in the consensus earnings estimate for the full year [3] Group 2 - The Business - Services industry, which includes Cintas, has 24 individual stocks and is currently ranked 129 in the Zacks Industry Rank, with an average gain of 6% year-to-date [5] - Another stock in the Business Services sector, Gorilla Technology Group Inc. (GRRR), has significantly outperformed with a year-to-date increase of 36.3% [4] - The Technology Services industry, which includes Gorilla Technology Group, has 152 stocks and is ranked 76, with a year-to-date gain of 11.4% [6]

Core Viewpoint - Cintas Corporation (CTAS) is positioned to benefit from strong business performance, strategic acquisitions, product line improvements, and operational excellence, with a market capitalization of $84 billion and a year-to-date growth of 11.8% compared to the industry's 9.3% [1][3]. Business Performance - Cintas has shown strength in its Uniform Rental and Facility Services segment, with revenues increasing by 7.5% year over year in the second quarter of fiscal 2025 [3]. - The First Aid and Safety Services segment has also performed well, with revenues climbing 12.4% year over year in the fiscal second quarter [4]. Financial Forecast - The company has provided an optimistic revenue forecast for fiscal 2025, expecting revenues between $10.255 billion and $10.32 billion, indicating a year-over-year growth of 7.1% at the midpoint of $10.28 billion [5]. Acquisition Strategy - Cintas is focused on acquisitions to enhance its customer base and product offerings, including the acquisition of Paris Uniform Services and SITEX, which have strengthened its market presence [6]. Business Initiatives - The company is enhancing its product portfolio and investing in technology and automation to improve operational efficiencies, including investments in SmartTruck technology and garment-sharing technology [7]. Shareholder Policies - Cintas is committed to returning value to shareholders through dividends and share buybacks, with dividend payouts of $295.6 million in the first half of fiscal 2025, up 15.5% year over year, and share buybacks totaling $651.5 million [8][9].

Core Viewpoint - Cintas Corporation (CTAS) has demonstrated significant stock price growth of 40.7% over the past year, outperforming both the industry and the S&P 500 composite [1][4]. Financial Performance - In the second quarter of fiscal 2025, Cintas reported a 7.8% year-over-year increase in revenue, driven by strong performance in the Uniform Rental and Facility Services segment, which grew by 7.6% [5]. - The First Aid and Safety Services segment saw a revenue increase of 12.4% year-over-year, attributed to rising demand for specific products [6]. - The Zacks Consensus Estimate projects fiscal 2025 revenues at $10.3 billion, reflecting a 7.3% growth from the previous year, with earnings expected to reach $4.3 per share, indicating a 13.7% year-over-year growth [17]. Product Innovation and Customer Focus - Cintas's product innovations have been crucial for growth across its four verticals: hospitality, education, healthcare, and state and local government [7]. - The company has developed technologies, such as garment dispensing systems and patented solutions for privacy curtains, to address customer needs and enhance satisfaction [8][9]. Capital Returns and Dividends - Cintas has consistently paid dividends, with payouts increasing from $375.1 million in fiscal 2022 to $530.9 million in fiscal 2024, and a recent quarterly dividend hike of 15.6% to $1.56 per share [10]. - The company boasts a trailing 12-month return on equity (ROE) of 40.6%, significantly higher than the industry average of 29.1% [11]. - Cintas's trailing 12-month return on invested capital (ROIC) stands at 15.7%, surpassing the industry benchmark of 12.1% [13]. Liquidity Position - Cintas maintains a strong liquidity position with a current ratio of 1.58, above the industry average of 1.42, indicating effective short-term debt coverage [15]. Investment Outlook - The combination of strong segment growth, customer-centric strategies, and robust financial metrics positions Cintas favorably for continued success, making it an attractive option for investors seeking capital returns [18][19].

Core Viewpoint - Cintas Inc. is actively pursuing growth through a proposed $275 per share takeover offer for competitor UniFirst Co., which was rejected despite being a 25% premium to UniFirst's closing price on January 10, 2025 [1][2]. Company Performance - Cintas has demonstrated strong business performance with five consecutive years of earnings per share (EPS) beats, and is projected to achieve a record $5 billion in revenues for 2025 [2][3]. - The company reported fiscal second-quarter 2025 EPS of $1.09, exceeding consensus estimates by $0.08, with revenues increasing by 7.8% year-over-year to $2.56 billion [4]. - Gross margin improved to 49.8%, up from 48% in the previous year, with net income rising 19.7% year-over-year to $448.5 million [5]. Revenue Streams - Nearly 50% of Cintas's revenues come from its facilities business, which includes a wide range of products and services such as cleaning supplies and safety equipment [3]. - The company is a leader in providing uniforms across various sectors, including healthcare and government agencies, benefiting from a strong labor market with 256,000 new jobs added in December 2024 [3]. Guidance and Market Reaction - Cintas raised its fiscal full-year 2025 EPS forecast to a range of $4.28 to $4.34, and revenue guidance to $10.255 billion to $10.320 billion, despite a subsequent 10.6% drop in stock price due to slightly lowered organic revenue growth expectations [7]. - The stock forecast indicates a 4.13% upside with an average price target of $198.46, while the highest analyst price target is $245.00 [6][10]. Technical Analysis - Cintas's stock has formed a descending triangle pattern, indicating potential bearish sentiment, with resistance at $228.12 and support at $181.04 [8][9]. - The daily anchored VWAP is rising at $186.80, and Fibonacci pullback support levels are identified at $181.04, $172.74, $167.79, and $162.16 [9].