Cintas Earnings: Business as Usual for the Largest Uniform Rental Provider

Cintas reported third quarter results the morning of March 26th, with quarterly organic sales rising nearly 8% year-over-year. The firm's gross and operating margin each expanded well over 100 basis points, resulting in almost 18% earnings per share growth. We've raised our fair value estimate to $168 from $162 to reflect management's more bullish revenue and earnings guidance.Cintas continues to trade at nearly 50 times forward earnings, a steep premium to the market and considerably above our fair value estimate. The market doesn't seem to mind, sending the stock up around 9% this morning. Cintas enjoys sticky customer relationships, dominant scale, and a stellar management team, but the shares are looking rich.In our view, this quarter was business as usual for Cintas. Its cost advantage continues to strengthen as the firm grows its footprint and adds new customers. Although we haven't seen what a prolonged economic slowdown would do to Cintas since the recession in the late 2000s, we believe its resilient business model and diversified customer base will help buoy its returns above its cost of capital regardless of the macro environment.