It has been about a month since the last earnings report for Cintas (CTAS). Shares have added about 1% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Cintas due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Cintas' Q1 Earnings & Revenues Surpass Estimates, View Up

Cintas reported first-quarter fiscal 2025 (ended Aug. 31, 2024) earnings of $1.10 per share, which beat the Zacks Consensus Estimate of $1.00. The bottom line increased 18.3% year over year despite an increase in operating costs.

Total revenues of $2.502 billion marginally outperformed the consensus estimate of $2.497 billion. The top line rose 6.8% year over year, driven by higher segmental revenues. Organic sales were up 8% year over year.

Cintas’ Segmental Results

The company has two reportable segments, Uniform Rental and Facility Services and First Aid and Safety Services. Other businesses like Uniform Direct Sale and Fire Protection Services are included in All Other. Quarterly sales data is briefly discussed below.

Revenues from the Uniform Rental and Facility Services segment (representing 77.3% of the quarter’s net sales) totaled $1.93 billion, up 5.9% year over year. Our estimate for segmental revenues was $1.93 billion.

Revenues from the First Aid and Safety Services segment (representing 11.7% of the quarter’s net sales) totaled $292.6 million, up 12.2% year over year. Our estimate for segmental revenues was $283 million.

Revenues from All Other business (representing 11% of the quarter’s net sales) totaled $275.2 million, up 8% year over year. Our estimate for segmental revenues was $275.3 million.

Margin Profile

Cintas’ cost of sales (comprising costs related to uniform rental and facility services and others) increased 4.1% year over year to $1.25 billion. It represented approximately 49.9% of net sales. Gross profit increased 9.6% to $1.25 billion. The gross margin was 50.1% compared with 48.7% in the year-ago period. Our estimate for the gross margin was pegged at 49.7%.

Selling and administrative expenses totaled $691.1 million, reflecting a 7.8% increase from the year-ago figure. It represented 27.6% of net sales. Operating income increased 12.1% year over year to $561 million. The operating margin was 22.4% compared with 21.4% in the year-ago quarter. Interest expenses increased 4.4% to $25.6 million.

Cintas’ Balance Sheet & Cash Flow

Exiting first-quarter fiscal 2025, Cintas had cash and cash equivalents of $101.4 million compared with $88.1 million at the end of the year-ago fiscal quarter. Long-term debt was about $2.03 billion compared with $2.48 billion at the end of the prior fiscal year.

In the first three months of fiscal 2025, CTAS generated net cash of $466.7 million from operating activities, up 38.5% from the year-ago period. Capital expenditures in the same period totaled $92.9 million, down 12.9% year over year. Free cash flow increased 62.4% year over year to $373.8 million.

The company repurchased shares worth $614.8 million compared with $73.3 million in the year-ago period. Dividend payments totaled $138.2 million, up approximately 17.5% year over year.

FY25 Guidance

For fiscal 2025, Cintas expects revenues to be in the range of $10.22-$10.32 billion, higher than the earlier predicted band of $10.16-$10.31 billion. Earnings per share are estimated to be in the range of $4.17-$4.25 compared with $4.06-$4.19 guided earlier.

Cintas predicts net interest expenses of approximately $101 million. This compares with interest expenses of $95 million recorded in fiscal 2024. The effective tax rate is expected to be 20.4%, which is the same compared with fiscal 2024.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, Cintas has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Cintas has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few 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

Cintas Corporation (CTAS) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research