GKSR G&K Services - Class A (MM)

Cintas Corporation (CTAS) is slated to report its first-quarter fiscal 2013 results after the closing bell on September 20. The Zacks Consensus Estimate for earnings for the quarter is 59 cents per share, representing an estimated year-over-year increase of 12.59%. Revenues, as per the Zacks Consensus Estimate, are expected to be $1.059 billion.

Fourth Quarter Synopsis

The company, in the fourth quarter (ended May 31, 2012), reported earnings of 60 cents per share, in line with the Zacks Consensus Estimate. Results improved from the year-ago earnings of 49 cents per share.

Revenues in the reported quarter increased 4.1% year over year to $1.05 billion, missing the Zacks Consensus Estimate of $1.07 billion.  

Estimate Revision Trend

Agreement

Out of the 11 analysts covering the stock, only 1 analyst has revised the estimate downwards for the first quarter over the last 7 days as well as 30 days.  On the other hand, none of the analysts have revised their estimates for fiscal 2013 in either direction over the last 7 and 30 days.  

Magnitude

The Zacks Consensus Estimates for both the first quarter and fiscal 2013 remained the same over the last 7 and 30 days.

Earnings Surprise History

With respect to earnings surprise, Cintas has topped the Zacks Consensus Estimate in all the last four quarters. The company has delivered an average positive earnings surprise of 10.66% over the preceding four quarters, implying that it has beaten the Zacks Consensus Estimate by that measure.

Our Take

Cintas, leveraging its strong balance sheet, redeploys cash to its shareholders thus adding value. During fourth-quarter 2012, the company purchased $3.3 million of shares at an aggregate cost of $129.6 million.

One of the important raw materials for Cintas is recycled paper used in document management segment. Gross margin during fourth-quarter fiscal 2012 dropped 70 basis points to 42.1% due to lower recycled paper prices. If paper price remains low then it may weigh on margins going forward.

Cintas faces tough competition from companies like G & K Services, Inc. (GKSR) and ABM Industries Incorporated (ABM). Cintas retains a short-term Zacks #2 Rank (Buy). We have a long-term Neutral recommendation on the stock.
 

 
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