Cintas (CTAS), the U.S. workwear provider, rose above a buy point Wednesday. The company is not a typical high-growth stock, with three-year compound annual earnings growth of about 10%. But consistent operating performance, a broad customer base and demand from institutional investors have placed it on the IBD Big Cap 20 and Earnings Estimate Revisions lists.
Consistent earnings underpin a 99 Composite Rating
Cintas has increased earnings per share by between 10% and 18% in each of the past four quarters. Revenue growth has ranged from 9% to 11%. Analysts’ expectations for the company’s results over the next several quarters have been broadly stable, while FactSet data shows that consensus earnings estimates for the next four reports have risen steadily since July.
Those factors helped Cintas earn a top-tier Composite Rating of 99. The stock also carries an A+ Accumulation/Distribution Rating, indicating strong recent demand from institutional investors. Within growth-stock screening systems, Cintas stands out not for rapid expansion, but for maintaining relatively consistent gains in both earnings and revenue.
Services reach about 5 million workers
Based in Cincinnati, Ohio, Cintas provides uniform services to about 5 million workers at more than 1 million customer businesses. Beyond workwear, the company offers safety services such as fire protection and first-aid programs, along with cleaning, hygiene and related supplies.
That mix gives Cintas revenue streams beyond one-time uniform sales. Businesses outsource laundry, workplace cleaning and some safety functions to specialized providers, creating a recurring base of orders for the company. Analysts have said the continued outsourcing of noncore tasks, combined with Cintas’ investment in technology to improve operating efficiency, has strengthened its operating position.
UniFirst deal remains under regulatory review
Several analysts raised their price targets for Cintas after the company reported results on Sept. 23. Argus analysts said Cintas could benefit as businesses outsource more noncore work, including laundry and workplace cleaning. They also pointed to the company’s technology investments as a way to improve efficiency.
In March, Cintas agreed to acquire UniFirst (UNF) in a cash-and-stock transaction valued at about $5.5 billion, or $310 per share. The deal remains subject to regulatory review and is expected to close by the end of this year.
UniFirst, based in Wilmington, Mass., provides uniforms to about 2 million workers and also operates safety and facility-services businesses. Its offerings include specialized apparel for cleanroom and nuclear-industry applications.
If completed as planned, the transaction would expand Cintas’ reach across uniform and related facility services. The timing, however, remains dependent on the progress of the regulatory review.