Cintas' (CTAS) "robust" operating margin expansion drove its earning-per-share beat for fiscal Q2, RBC Capital Markets said.

Cintas reported fiscal Q2 earnings of $1.09 per diluted share, up from $0.90 a year earlier, surpassing analysts' expectations, as analysts polled by FactSet had anticipated $1.01.

The company's operating margin of 23.1% exceeded RBC's forecast of 21.5% and consensus estimates of 21.8%. The strong performance was driven by investments in technology and automation, sourcing and supply chain initiatives, and a reduction in energy costs, RBC said in a note Thursday.

Additionally, Cintas' gross margin increased to 49.8%, bolstered by volume growth, operating leverage, and improvements in supply chain and operational efficiencies. Organic revenue growth was also solid, with Uniforms, First Aid, and Fire Protection businesses posting year-over-year increases of 6.9%, 12.3%, and 10%, respectively.

The company's fiscal Q2 results also benefitted from strong execution, positioning Cintas to meet its full-year free cash flow conversion target of 90-100%. RBC believes this will support continued organic growth investments, dividend increases, and potential share buybacks or merger and acquisition activities.

RBC has a sector perform rating on the company's stock with a $215 price target.

Cintas shares were up 2% in recent trading.

Price: 186.52, Change: +3.72, Percent Change: +2.04