Uniform Maker Cintas Tops Q2 Earnings Estimates, Raises Guidance

Cincinnati, Ohio-based uniform maker Cintas Corp. reported better-than-expected earnings in the fiscal second quarter and lifted its 2022 revenue and profit forecast.

The company reported earnings per share (EPS) of $2.76, beating the market expectations of $2.62 per share. Revenue for the second quarter of fiscal 2022 increased 9.4% to $1.92 billion compared to $1.76 billion in last year’s second quarter. That also topped the Wall Street consensus estimates of $1.9 billion.

“Wide-moat Cintas reported fiscal 2022 second-quarter earnings that were ahead of what was implied in our full-year expectations. We expect to increase our fair value estimate by a high-single-digit percentage due to increased revenue and the time value of money. Total revenue grew 9.4% year over year, and we are impressed with management’s continued efforts to improve its top line,” noted Joshua Aguilar, equity analyst at Morningstar.

Centas predicts revenues of $ 7.63-$ 7.70 billion for fiscal 2022, which ends in May 2022, up from $ 7.58-$ 7.67 billion previously expected. As a result, earnings per share are expected to reach $10.70-$10.95, compared with $10.60-$10.90 previously forecast.

However, Cintas stock closed 1.81% lower at $428.89 on Wednesday. It soared over 20% so far this year.

Analyst Comments

“What to do with Cintas (CTAS) shares: Buy more if you think the company can expand operating margins at the high end or above previously implied 0-70bps y/y range (after expanding by ~310bps last year from pre-pandemic levels) despite a challenging inflationary environment. We also think the strong balance sheet and high FCF generation create positive portfolio catalysts such as more M&A (and potentially a larger deal) and increased buybacks,” noted Hamzah Mazari, equity analyst at Jefferies.

Cintas Stock Price Forecast

Seven analysts who offered stock ratings for Cintas in the last three months forecast the average price in 12 months of $421.57 with a high forecast of $475.00 and a low forecast of $365.00.

The average price target represents a -1.71% change from the last price of $428.89. Of those seven analysts, four rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $399 with a high of $673 under a bull scenario and $242 under the worst-case scenario. The firm gave an “Equal-weight” rating on the uniform maker’s stock.

“Revenue now ~4% above pre-COVID levels as F2Q EPS came in above MSe though this was primarily driven by tax, with operating income missing our forecast. FY22/FY23 EPS ests largely unch. PT to $399, but valuation fair in our view; stay EW,” noted Toni Kaplan, equity analyst at Morgan Stanley.

“We think fundamentals will perform well in a cyclical recovery given CTAS‘ recent history of outperforming labour growth. MS economists are forecasting significant employment growth in coming quarters, with the ending 2022 unemployment rate in-line with 2019 levels. With a strong balance sheet, potential M&A could be extremely accretive to CTAS earnings. Though valuation is high relative to history, we do not see a near term catalyst to cause the multiple to contract.”

Several other analysts have also updated their stock outlook. Jefferies raised the target price to $492 from $448. Credit Suisse lifted the price objective to $425 from $385. RBC upped the target price to $475 from $450. Stifel increased the target price to $378 from $365.

Technical analysis suggests it is good to buy now as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Check out FX Empire’s earnings calendar

Earnings to Watch in Holiday-Shortened Week: Micron Technology, Nike, General Mills and CarMax in Focus

The following is a list of earnings slated for release December 20-24, along with a few previews. Although next week’s earnings are unlikely to have much of an effect on major market movements, it is sufficient to gauge investors’ sentiment.

Earnings Calendar For The Week Of December 20

Monday (December 20)

IN THE SPOTLIGHT: MICRON TECHNOLOGY, NIKE

MICRON TECHNOLOGY: The world’s leading semiconductor manufacturer is expected to report its fiscal first-quarter earnings of $2.01 per share, representing year-over-year growth of more than 155% from $0.78 per share seen in the same quarter a year ago.

The Boise Idaho-based semiconductor company is expected to post revenue growth of over 30% to around $7.7 billion from a year earlier. In the last two years, the company has topped expectations on earnings per share at all times.

“While the underlying demand trends are strong and producer inventory levels are low heading into a period of seasonal strength, there are some signs of inventory adjustments short term after customers-built inventory,” noted Joseph Moore, equity analyst at Morgan Stanley.

“We see demand growth on the back of seasonality, memory elasticity/higher content per unit, and low customer inventories, and very slow supply growth in DRAM given declines in capex. We continue to believe that memory stocks have a relatively well-defined earnings cycle, though highs and lows are likely to be better than they have been historically.”

NIKE: The world’s largest athletic footwear and apparel seller is expected to report earnings per share of $0.62 in the fiscal second quarter, which represents a year-over-year decline of over 20% from $0.78 per share seen in the same period a year ago.

The Beaverton, Oregon, footwear retailer would post revenue of $11.23 billion, down about 0.1% from a year earlier. For four quarters in a row, the company has exceeded expectations on earnings per share.

“We are raising our price target to $189 representing 40x our FY23E EPS of $4.73. We don’t believe management will make significant changes to its FY22 guidance but view the business as running above plan in N. America and Europe (EMEA). The gross margin could be a lever to raise back to prior guidance (+150bps at the high end). China is a point of uncertainty with investors and the model,” noted John Kernan, equity analyst at Cowen.

“We are raising our expectations for Q2, largely driven by an incrementally stronger outlook for N.A. and EMEA, with less conviction behind results in Greater China. We now model Q2 revenues +3% y/y ex FX to $11.52B vs consensus of $11.255B, driven by N.A. +2% (+3% vs 2019 compared to Q1’s +14% vs 2019), EMEA +1% (+17% vs 2019compared to Q1’s +19%), Greater China -2%, and APLA +10%.

We forecast gross margin expanding +130bps y/y, as higher full-price selling and DTC mix offsets higher freight costs and some product cost inflation (we include gross margin quarterly bps drivers in Fig 5). On a 2-year stack basis, product costs have deleveraged 240bps or more in each of the last two quarters. We see SG&A dollars growing +10% y/y to 31.1% of revenues (+204bps y/y). Ultimately, this drives EPS of $0.75 vs consensus of $0.63 – we model a 100bps impact from FX.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 20

TICKER COMPANY EPS FORECAST
MU Micron Technology, Inc.(MU) $2.01
NKE NIKE, Inc.(NKE) $0.63
BRZE Braze, Inc.(BRZE) $0.63

Tuesday (December 21)

IN THE SPOTLIGHT: GENERAL MILLS

The Minneapolis Minnesota-based company, General Mills, is expected to report its fiscal second-quarter earnings of $1.05 per share down from $1.06 per share seen in the same period a year ago.

The consumer foods manufacturer’s revenue would decline over 2% year-over-year to around $4.8 billion up from $4.72 billion seen a year earlier. In the last two years, the company has missed earnings per share estimates only once.

“While growth abounded for domestic food manufacturers as consumers rushed to stock up on essential wares as COVID-19 took hold, it hasn’t been a pure panacea for this intensely competitive space. And we think the future trajectory hinges on which of the trends that took centre stage the past few years will hold,” noted Erin Lash, Sector Director at Morningstar.

“In this context, while we concede many consumers honed their cooking skills while sheltering at home, as busy schedules resume, we think food consumption will revert such that a greater portion of budgets is expended outside of the home, in line with pre-pandemic levels. Further, although grocers simplified shelf assortments to maximize productivity during the peak in demand, we think the variety will return as supply chains normalize.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 21

TICKER COMPANY EPS FORECAST
FDS FactSet Research Systems Inc.(FDS) $2.99
GIS General Mills, Inc.(GIS) $1.05
NEOG Neogen Corporation(NEOG) $0.17

Wednesday (December 22)

IN THE SPOTLIGHT: CARMAX

The used-car retailer CarMax is expected to report its fiscal third-quarter earnings of $1.49 per share, which represents year-over-year growth of about 5% from $1.42 per share seen in the same period a year ago.

The Richmond, Virginia-based used car giant would post year-over-year revenue growth of nearly 50% to $7.63 billion in the quarter ended November 2021. In the last two years, the company has exceeded expectations on earnings per share with an average surprise of over 80%.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect CarMax (KMX) to successfully execute their Omnichannel strategy, providing both online and physical dealer options to consumers,” noted Adam Jonas, equity analyst at Morgan Stanley.

KMX has consistently generated >$2,000 GPU and has one of the strongest balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing KMX to achieve operating leverage, with upside from the omni-channel rollout.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 22

TICKER COMPANY EPS FORECAST
CTAS Cintas Corporation(CTAS) $2.62
KMX CarMax, Inc.(KMX) $1.5
PAYX Paychex, Inc.(PAYX) $0.79

Thursday (December 23)

No major earnings are scheduled for release.

Friday (December 24)

The New York Stock Exchange and Nasdaq observe Christmas, markets will be closed on Friday.

Cintas Tops Q4 Earnings Estimates; Target Price $400

Cintas Corp, which provides products and services to businesses, reported better-than-expected earnings in the fiscal fourth quarter and said its revenue rose to $1.84 billion compared to $1.62 billion in last year’s fourth quarter.

The company said its diluted earnings per share (EPS) were $2.47 in the fourth quarter of fiscal 2021, an increase of 83.0% from last year’s fourth-quarter diluted EPS of $1.35. That was higher than the Wall Street consensus estimates of $2.31 per share.

Cintas predicted earnings in a range of $10.35 to $10.75 per share on revenues between $7.53 billion and $7.63 billion for the fiscal year 2022. That was lower than the market expectations of $10.03 per share on revenues of $7.66 billion for the year.

Cintas Corp shares traded 3.18% higher at $380.92 on Friday. The stock rose about 8% so far this year.

Analyst Comments

“4Q above MSe, but FY22 guidance was underwhelming with rev and EPS 1% below our forecast. Guidance does imply margin expansion, however, despite inflationary pressures seen in the industry. price target to $353, though stay EW as multiple remains full,” noted Toni Kaplan, equity analyst at Morgan Stanley.

“We think fundamentals will perform well in a cyclical recovery given CTAS‘ recent history of outperforming labor growth. MS economists are forecasting significant employment growth in coming quarters, with the ending 2022 unemployment rate only 0.7% above 2019 levels. With a strong balance sheet, potential M&A could be extremely accretive to CTAS earnings. Though valuation is high relative to history, we do not see a near-term catalyst to cause the multiple to contract.”

Cintas Corp Stock Price Forecast

Eight analysts who offered stock ratings for Cintas Corp in the last three months forecast the average price in 12 months of $400.67 with a high forecast of $425.00 and a low forecast of $353.00.

The average price target represents a 4.97% change from the last price of $381.69. From those eight analysts, five rated “Buy”, three rated “Hold” while one rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $353 with a high of $601 under a bull scenario and $209 under the worst-case scenario. The firm gave an “Equal-weight” rating on the company’s stock.

Several other analysts have also updated their stock outlook. Jefferies raised the target price to $425 from $400. JPMorgan lifted the target price to $430 from $390. Credit Suisse upped the target price to $375 from $350. CGRA increased the target price by $16 to $366. BofA Global raised the price objective to $358 from $353.

“What to do with CTAS shares: Buy more if you believe the company can consistently deliver 6-8% organic growth and that post-COVID-19 outsourcing picks up on uniform rental. We also believe the under-levered balance sheet is underappreciated in terms of larger-scale M&A,” noted Hamzah Mazari, equity analyst at Jefferies.

Check out FX Empire’s earnings calendar

Uniform Maker Cintas Beat Wall Street Estimates; Surge in COVID-19 Cases Key Risk

Mason-based corporate uniform maker Cintas reported better-than-expected in the second quarter of the fiscal year 2021 as demand recovered in the world’s biggest economy but raging COVID-19 cases posed significant downside risks to the nascent recovery.

Revenue for the second quarter of fiscal 2021 was $1.76 billion compared to $1.84 billion in last year’s second quarter, beating the market consensus estimate of $1.75 billion.

Earnings per diluted share from continuing operations (EPS) were $2.62 in the second quarter of fiscal 2021, an increase of 15.4% from last year’s second-quarter EPS. That was also higher than the Wall Street estimate of $2.17 per share.

“Wide-moat-rated Cintas’ second-quarter results met our expectations. We raise our fair value estimate to $233 from $231, due to a slight increase in our Stage II return on new invested capital assumption. Looking forward, we expect COVID-19 impacts will slow growth slightly through 2021, normalizing in the fourth quarter due to an easier year-over-year comparison,” said Joshua Aguilar, equity analyst at Morningstar.

Cintas shares closed 0.55% higher at $348.00 on Tuesday; the stock is up about 30% so far this year.

“What to do with Cintas (CTAS) shares: Buy more if you think the uniform rental/facility services and fire protection businesses will continue to improve sequentially and secular tailwinds in certain verticals will drive sustainable long-term growth. We also like the company’s low leverage and balance sheet catalysts heading into CY21,” said Hamzah Mazari, equity analyst at Jefferies.

Cintas Stock Price Forecast

Nine analysts who offered stock ratings for Cintas in the last three months forecast the average price in 12 months at $345.25 with a high forecast of $405.00 and a low forecast of $240.00. The average price target represents a -0.79% decrease from the last price of $348.00. From those nine equity analysts, four rated “Buy”, four rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $261 with a high of $448 under a bull scenario and $156 under the worst-case scenario. The firm currently has an “Underweight” rating on the uniform maker company’s stock.

“While revenue trends improved into quarter-end, 3Q guidance was not provided given increasing COVID-19 case counts. Though we largely view this as conservatism, we still think a more rapid recovery is needed to justify CTAS’ premium multiple. Stay UW,” said Toni Kaplan, equity analyst at Morgan Stanley.

Several other analysts have also recently commented on the stock. RBC raised the stock price forecast to $405 from $360. Credit Suisse upped the target price to $340 from $310. JP Morgan increased the price objective to $378 from $350. Cintas had its price objective hoisted by equities researchers at Barclays to $380 from $350. The brokerage currently has an “overweight” rating on the business services provider’s stock.

In addition, BidaskClub raised Cintas from a “buy” rating to a “strong-buy” rating. At last, Jefferies upped their price objective to $400 from $365 and gave the stock a “buy” rating.

Analyst Comments

“We expect COVID-19 to have an impact on Cintas, with the duration and lasting economic impact a key driver of the stock. Despite excellent execution and a strong track record of revenue growth and capital allocation, Cintas remains a cyclical company; we think risk-reward skews to the downside given the stock’s elevated multiple and the potential for uniform employment to remain muted especially if small businesses close,” Morgan Stanley’s Kaplan.

“MS economists are forecasting an extended period of lower employment and CTAS’ top-line growth could become challenged if labour growth stays under pressure.”

Upside and Downside Risks

Risks to Upside: 1) COVID-19 impact is limited and the economy returns to strong growth. 2) SAP implementation provides better-than-expected cost savings. 3) New cross-selling opportunities. 4) Further geographic expansion within First Aid segment. 4) G&K synergies exceed our estimates- Morgan Stanley.

Risks to Downside: 1) COVID-19 has longer than expected impact with lasting economic fallout. 2) Significant decline in uniform employment. 3) Acquisition outside of core competency.

Check out FX Empire’s earnings calendar

Earnings to Watch in Holiday-Shortened Week: Heico, Carnival, CarMax, Cintas and Weibo in Focus

Monday (December 21)

IN THE SPOTLIGHT: HEICO, CARNIVAL

HEICOHeico, an aerospace and electronics company, is expected to report a profit of $0.42 in the fourth quarter, down from $0.62 per share seen in the same quarter a year ago. The Hollywood, Florida-based company will post a more than 20% decline in revenue to $414.782 million from $ 541.53 million a year ago.

CARNIVALCarnival, the world’s largest cruise ship operator, is expected to report a loss for the third consecutive time in the fourth quarter. The Miami, Florida-based company’s revenue will plunge ​nearly 100% to $142.09 million from $4.78 billion posted in the same period a year ago. Carnival is expected to report a loss of $1.86 per share, worse compared to a profit of 62 cents per share registered in the same quarter last year.

“We think the cruise industry will be one of the slowest sub-sectors to recover from the COVID-19. Cruising needs just not international travel to return, but ports to reopen, authorities to permit cruising, and the return of customer confidence,” said Jamie Rollo, equity analyst at Morgan Stanley.

“We expect cruising to resume in January 2021, and only expect FY19 EBITDA to return in FY24 given historically CCL has lacked pricing power, and EPS to take even longer given dilution of share issues and higher interest expense. We see debt doubling in FY21 vs FY19 due to operating losses and high capex commitments, and leverage looks high at 4-5x even in FY23-24e, so we see a risk more equity might need to be raised,” Rollo added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 21

Ticker Company EPS Forecast
HEI Heico $0.42
CUK Carnival -$1.84
CCL Carnival -$1.84
GCTAY Siemens Gamesa ADR $0.01
CCL Carnival -£1.39

Tuesday (December 22)

IN THE SPOTLIGHT: CARMAX, CINTAS

CARMAX: CarMax, America’s largest used-car retailer and a Fortune 500 company, is expected to report a profit of $1.14 per share in the fourth quarter, up from $1.04 per share reported in the same quarter a year ago. Revenues are expected to be $5 billion, rising more than 4% from the year-ago quarter.

William Blair upgraded their earnings per share forecasts to $1.29 for Q4 2021, up from the previous $1.26. The Chicago-based investment bank also forecasts FY2023 earnings at $6.15 EPS.

“Based on historical & current data, we expect to see strength in used car sales as we move forward, particularly given the shortage of new car inventory, manufacturers pulling back on incentives, and potential tailwinds from de-urbanization, mass transit, ride-sharing, and travel. We expect Carmax to successfully execute their Omnichannel strategy, providing both online and physical dealer options to the consumer,” said Adam Jonas, equity analyst at Morgan Stanley.

“Carmax has consistently generated profitability and has one of the strong balance sheets amongst the dealers. Long term, we estimate strong growth in same-store sales along new store openings, allowing Carmax to achieve operating leverage, with upside from the omnichannel rollout,” Jonas added.

CINTAS: Mason-based corporate uniform maker Cintas is expected to report a profit of $2.17 per share in the second quarter fiscal 2021, lower than $2.27 per share reported in the same quarter a year ago. Revenue is forecast to decline to $1.75 billion from $1.84 billion.

“We expect COVID-19 to have an impact on CTAS, with the duration and lasting economic impact a key driver of the stock. Despite excellent execution and a strong track record of revenue growth and capital allocation, Cintas remains a cyclical company; we think risk-reward skews to the downside given the stock’s elevated multiple and the potential for uniform employment to remain muted especially if small businesses close,” said Toni Kaplan, equity analyst at Morgan Stanley.

“MS economists are forecasting an extended period of lower employment and CTAS’ top-line growth could become challenged if labour growth stays under pressure,” Kaplan added.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE DECEMBER 22

Ticker Company EPS Forecast
KMX CarMax $1.14
NEOG Neogen $0.31
CTAS Cintas $2.17
ACI AltaGas Canada $0.41
HOCPY Hoya Corp $0.74

Wednesday (December 23)

Ticker Company EPS Forecast
PAYX Paychex $0.66
AUOTY AU Optronics $0.09

Thursday (December 24)

Ticker Company EPS Forecast
ASEKY Aisin Seiki Co $0.42
RLAY Relay Therapeutics Inc. -$0.32

December 25-January 1

IN THE SPOTLIGHT: WEIBO

No major earnings scheduled for release during this period. However, Chinese microblogging website Weibo Corporation will announce its unaudited financial results for the third quarter of 2020 before the market opens on Monday, December 28, 2020.

China’s biggest social media platforms Weibo is expected to report a profit of 61 cents​ per share according to the mean Refinitiv estimate from twelve analysts. Wall Street expects results to range from 57 cents to ​65 cents per share, Reuters reported.

“Weibo is affected by macro and competitive headwinds that have been pressuring other online ad platforms, including Baidu, iQIYI and Sohu, which could linger – it may take time to recover. We think the structural challenge from ad inventory increase across the industry will be hard to mitigate in the near term,” said Alex Ko, equity analyst at Morgan Stanley.

“We await more visibility on ad demand recovery and Weibo’s monetization progress amid healthy user momentum. Our price target implies 15x P/E on our 2021 non-GAAP EPS forecast vs. the historical trough of 12x, given earnings growth trajectory,” Ko added.

Three Hidden Gems In The Nasdaq-100

Market players tend to focus their capital on just a handful of well-known Nasdaq-100 components, like Apple Inc. (AAPL), Microsoft Corp. (MSFT), and Tesla Inc. (TSLA). Another sizable group just trades the index as a whole, through Investo QQQ Trust or the CME index futures contract. However, many lesser-known components have carved stronger price action since March 2020, or have outperformed their Silicon Valley rivals for a decade or more.

Traders and market technicians can uncover these hidden gems by sorting a list of Nasdaq-100 index components by relative strength. There are many ways to accomplish this task but the most effective method I’ve found is to list securities by relative positioning above or below their 200-day exponential moving averages (EMAs). Not surprisingly, running a list in this mixed autumn market reveals three companies that required searches to find out how they make money.

Pinduoduo

Pinduoduo Inc. (PDD) was added to the Nasdaq-100 index in August. The Shanghai-based company operates a hugely-popular mobile e-commerce platform that specializes in apparel, appliances, and household goods. The stock now sits at the top of the index performance list, carving a series of new highs while better-known tech stocks grind through fourth quarter corrections. However, this isn’t a cheap security by any metric, with a 363% 2020 return-to-date.

Align Technology

Align Technology Inc. (ALGN) manufactures and markets Invisalign clear dental aligners and iTero intraoral scanners, as well as other products for dentists and orthodontists. The stock posted a 3-year low in March 2020 and turned sharply higher, completing a breakout above the September 2018 high near 400 in October. It posted an all-time high at 507 on Nov. 9 and pulled back, testing new gains. It’s now approaching support, setting the stage for further upside.

Cintas

Cintas Corp (CTAS) provides janitorial and safety-oriented uniforms and business services in North America, Latin America, Europe, and Asia. This is one of the top Nasdaq-100 performers in the last decade, despite their relatively humble business model. The stock got cut in half during the first quarter’s pandemic decline and bounced strongly, recouped 100% of the losses into June. An August breakout is now gathering steam, opening the door to significant upside.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.