Business service provider Cintas Corporation (NASDAQ: CTAS) seems to have all the right ingredients in place to post upbeat earnings for the fourth quarter of Fiscal 2022 (ended May 2022). The $39-billion company is slated to report its fourth-quarter results on July 14, 2022, before the market opens.
In the last four fiscal quarters, the company’s earnings and revenues surpassed consensus estimates and year-ago tallies.
CTAS’ Q4 Consensus Estimates Are Promising
For the quarter under review, the consensus estimate for Cintas’ earnings is $2.68 per share, reflecting an increase of 8.5% from $2.47 per share recorded in the year-ago quarter. The consensus estimate is also higher than its third-quarter earnings of $2.44 per share.
Analysts expect the company to post revenues of $2.01 billion for the fourth quarter, up 9.2% from the year-ago tally of $1.84 billion and 2.6% above the sequential number of $1.96 billion.
Factors Building CTAS’ Prospects
Cintas’ offerings, which include floor care products, restroom supplies, uniforms, and first aid and safety products, are in high demand in the United States and globally. The impact of this tailwind was visible in the third quarter of Fiscal 2022, while a similar trend might reflect in its fourth-quarter numbers.
Also, constant innovation of its products and deep penetration in the markets served through new businesses might have added new vigor to the company’s top line in the fourth quarter. It is worth noting here that Cintas has a strong presence in markets like food service, health care, hospitality, construction and manufacturing.
Cintas’ new enterprise resource planning system and focus on improving operational efficiency might have been advantageous in the fourth quarter. The company’s sound cash position and effective deployment to increase shareholders’ value are forecast to have been a boon in the quarter.
On the flip side, high cost of energy, including electricity, gasoline, and natural gas, and high tax rates might have hurt the quarter.
For the fourth quarter, Cintas forecasts revenues of $1.96-$2.02 billion and earnings of $2.54-$2.74 per share. Consensus estimates mentioned above are well within the company’s guided range for the fourth quarter.
The company expects the tax rate to be 23.2% in the fourth quarter, higher than 19.4% in the year-ago quarter. The impact of high taxes on the bottom line is forecast to be $0.14 per share.
Wall Street’s Take on CTAS
On TipRanks, Cintas has a Strong Buy consensus rating based on three Buys and one Hold. CTAS’ average price target is $438.75, representing 15.23% upside potential from the current level. Shares of the company have climbed 6.4% in the past month.
Five days ago, Ashish Sabadra of RBC Capital reiterated a Buy rating on CTAS with a price target of $475 (24.75% upside potential).
The positive momentum around Cintas’ prospects is reflected in the recent share purchases made by hedge funds and retail investors. While hedge fund holdings in CTAS increased by 26 thousand shares in the last quarter, retail portfolios with exposure to the company rose 2.6% in the past 30 days.
Also, financial bloggers are 85% Bullish on CTAS, compared with the sector average of 66%.
Key Takeaway for Cintas’ Investors
A diversified customer base, innovative capabilities, and high demand for products offered increase Cintas’ investment appeal. Its growth opportunities are bright, as it serves only one million businesses in North America, which fosters approximately 16 million businesses on its land. Further, Cintas’ past performance and healthy prospects raise the probability of upbeat results in the fourth quarter of Fiscal 2022.
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