Cintas Corporation CTAS posted impressive fourth-quarter fiscal 2018 (ended May 31, 2018) results driven by healthy top-line growth. Net income from continuing operations for the quarter surged 130.4% to $189.3 million or $1.68 per share from $82.2 million or 75 cents per share recorded in the year-earlier quarter. Adjusted earnings came in at $1.77 per share, which surpassed the Zacks Consensus Estimate of $1.67.

Quarterly revenues increased 9.1% year over year to $1,669.6 million, exceeding the Zacks Consensus Estimate of $1,637 million. Organic growth for the reported quarter improved 5.1% year over year, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations.

Gross margin increased to 45.1% from 44.4% in the prior-year quarter. Operating income was $265.5 million, up 49.7% year over year. Operating income, excluding G&K transaction and integration expenses, increased 16.4% year over year, resulting in an adjusted operating margin of 16.8%. 

For fiscal 2018, net income and earnings per share (EPS) from continuing operations were $783.9 million and $7.03, respectively, compared with $457.3 million and $4.17 last fiscal. The company reported adjusted earnings of $5.94 per share. Revenues for the year were $6,476.6 million compared with $5,323.4 million in the prior-year period. The increase was driven by an organic growth rate of 7.1%.

Segmental Performance

Uniform Rental and Facility Servicesrevenues for the fiscal fourth quarter improved 10.1% year over year to $1,342.8 million and accounted for 80.4% of the total revenues. The segment recorded year-over-year organic growth of 5.3%. Also, gross margin for the segment increased to 45% from 44.6% in the year-ago quarter.

Cintas Corporation Price, Consensus and EPS Surprise

 

Cintas Corporation Price, Consensus and EPS Surprise | Cintas Corporation Quote

At the Other segment, revenues were up 5.3% year over year to $326.8 million and accounted for 19.6% of the total revenues. This segment includes the First Aid and Safety Services, and All Other businesses that comprise the Fire Protection Services and Direct Sale business. The First Aid and Safety Services recorded organic growth of 9.4%. The segment’s gross margin increased to 45.2% from 43.5% in the year-ago quarter.

Financial Position

At the end of the fiscal fourth quarter, cash and cash equivalents came in at $138.7 million compared with $169.3 million in the prior year. Long-term debt declined to $3,165.8 million from $3,410.4 million recorded in the previous year.

Net cash from operating activities was $964.2 million for fiscal 2018 compared with $763.9 million in the prior year. Free cash flow for the fiscal increased to $692.5 million from $490.6 million a year ago.

Costs & Margins

Costs and expenses in the reported quarter was $1,404.1 million, higher than $1,353 million recorded in the year-ago period.

Selling and administrative expenses in the fiscal fourth quarter were $471.8 million, higher than $437.7 million incurred in the year-ago quarter.

Moving Forward

Cintas continues to deliver organic growth through superior execution of its operational plans. We remain encouraged by the company’s strong quarterly performance.

For fiscal 2019, revenues are expected in the range of $6.75−$6.82 billion while EPS from continuing operations is expected to be between $7.00 and $7.15 per share.

Stocks to Consider

Cintas currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Roper Technologies, Inc. ROP, Capstone Turbine Corporation CPST and Eaton Corporation, PLC ETN. While Roper Technologies sports a Zacks Rank #1 (Strong Buy), Capstone Turbine and Eaton carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Roper Technologies has surpassed estimates in each of the trailing four quarters with an average beat of 2.95%.

Capstone Turbine has exceeded estimates thrice in the trailing four quarters with an average beat of 37.50%.

Eaton has surpassed estimates twice in the trailing four quarters with an average beat of 1.33%.

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