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Here's Why Hold Strategy is Apt for Cintas (CTAS) Stock Now

Cintas Corporation CTAS is backed by multiple tailwinds despite headwinds from labor shortages and high cost of sales.

Strong segmental performances are driving this Zacks Rank #3 (Hold) company’s top line (up 13% year over year in the first nine months of fiscal 2023). Increased volumes and higher prices are driving revenues at the Uniform Rental and Facility Services segment (revenues rose 11.5% year over year in the first nine months of fiscal 2023).

Strength across the first aid cabinet service business is boosting Cintas’ First Aid and Safety Services segment’s performance. Revenues from the segment climbed 14.2% in the first nine months of fiscal 2023. The company is also seeing strong growth across its uniform direct sale (32% organic growth in the fiscal third quarter) and fire protection services (20.7% organic growth in the fiscal third quarter) businesses.

With easing supply-chain disruptions and stable market conditions, Cintas's improved fiscal 2023 outlook raises optimism in the stock. The company expects revenues of $8.74-$8.80 billion in fiscal 2023 compared with $8.67-$8.75 billion stated earlier.

Earnings are estimated to be $12.70-$12.90 per share compared with $12.50-$12.80 mentioned earlier. For fiscal 2023, Cintas expects adjusted operating income of $1.77-$1.80 compared with $1.75-$1.79 billion stated earlier. In fiscal 2022, the company reported an operating income of $1.55 billion.

Cintas' focus on the enhancement of its product portfolio, along with investments in technology and existing facilities, should continue to drive its performance. Also, its focus on operational execution, cost-control measures and pricing actions is helping it maintain healthy margin performance. For instance, in the fiscal third quarter, the gross margin increased 140 basis points to 47.2%.

Cintas’ commitment to rewarding shareholders through dividends and share buybacks is encouraging. In the first nine months of fiscal 2023, the company repurchased shares worth $370.92 million and paid out dividends of $332.42 million. In fiscal 2022, the company repurchased shares worth $1.53 billion, up from $554.12 million in the year-ago period. Dividend payments totaled $375.12 million in fiscal 2022.

Backed by the above-mentioned tailwinds and shareholder-friendly policies, shares of Cintas have gained 13.4% in the past six months.

 

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Zacks Investment Research


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The positivity surrounding the stock is evident from the Zacks Consensus Estimate for the company’s fiscal 2023 earnings being revised upward by 1% in the past 60 days.

Key Picks

Some better-ranked stocks within the broader Industrial Products sector are as follows:

Deere & Company DE currently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 4.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.

Deere has an estimated earnings growth rate of 31% for the current fiscal year. The stock has gained around 5% in the past six months.

Ingersoll Rand IR presently flaunts a Zacks Rank #1. The company delivered a trailing four-quarter earnings surprise of 8.5%, on average.

Ingersoll Rand has an estimated earnings growth rate of 7% for the current year. The stock has rallied 20.2% in the past six months.

Illinois Tool Works ITW currently carries a Zacks Rank #2 (Buy). The company pulled off a trailing four-quarter earnings surprise of 0.9%, on average.

Illinois Tool has an estimated earnings growth rate of 4% in the past six months. The stock has gained 22.4% in the past six months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Illinois Tool Works Inc. (ITW) : Free Stock Analysis Report

Deere & Company (DE) : Free Stock Analysis Report

Cintas Corporation (CTAS) : Free Stock Analysis Report

Ingersoll Rand Inc. (IR) : Free Stock Analysis Report

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