Cintas Drops 2.3% As 2Q Sales Outlook Disappoints

Shares of Cintas Corp. fell 2.3% on Wednesday, after the company’s 2Q revenue forecast fell short of analysts’ expectations. The uniform rentals company forecasts 2Q revenues in the range of $1.725 billion to $1.750 billion, versus the Street consensus of $1.752 billion. The company expects earnings in the range of $2 to $2.20 per share for the second quarter ending Nov., versus analysts’ estimates of $2.06 per share.

Meanwhile, Cintas (CTAS) reported 1Q earnings of $2.78 per share, exceeding analysts’ estimates of $2.13 per share. Earnings grew 19.8% year-over-year in the quarter ending Aug. 31, driven by higher gross and operating margins. Its 1Q revenues of $1.75 billion fell 3.6% year-over-year due to a 4.1% decline in uniform rental and facilities services revenue. Analysts had expected sales of $1.70 billion.

Cintas CEO Scott D. Farmer said that the COVID-19 pandemic “remains a significant disruption to the economy and our business.” He further concluded “Visibility to future financial performance remains impaired due to the COVID-19 pandemic.” The company, therefore, did not provide fiscal year guidance. (See CTAS stock analysis on TipRanks).

On Sept. 18, Robert W. Baird analyst Andrew Wittmann chose Cintas as a “Fresh Pick” ahead of 1Q results. Wittmann maintained a Hold rating on the stock but raised his price target to $333 (5.1% upside potential) from $310, as he expects steady recovery at or above Street expectations. The analyst believes bot margins and revenue trends could positively surprise the results. He further expects upside to estimates over the long term.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 4 Buys, 2 Holds, and 1 Sell. The $305.40 average price target implies downside potential of 3.6% to current levels. Shares are up 17.7% year-to-date.