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Cintas Corp CTAS

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Morningstar’s Analysis

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Cintas Offsets Revenue Losses Through Sales Growth in New End Markets; We Increase FVE to $233

Joshua Aguilar Equity Analyst

Analyst Note

| Joshua Aguilar |

Wide-moat-rated Cintas’ second-quarter results met our expectations. We raise our fair value estimate to $233 per share from $231 due to a slight increase in our assumption for Stage II return on new invested capital. Total second-quarter revenue decreased about 5% year over year, in line with our expectations. Uniform rentals and facilities services decreased 4% year over year, a decline that we attribute to social distancing ordinances in place across the country. Revenue increased 1% sequentially since at this point most of Cintas’ customers are open and operating but at a reduced capacity. Demand for Cintas’ traditional suite of services remains tempered, but the firm now services previously untapped markets such as healthcare, government, and education, revenue from which doubled year over year. Not all of these will persist in the long run, but we see opportunity in the growth of the company's scrub rental program, whose first-half sales have doubled year over year. We expect COVID-19 impacts will slow growth slightly through 2021, normalizing in the fourth quarter due to an easier year-over-year comparison.

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Company Profile

Business Description

In its core uniform and facility services unit (81% of sales), Cintas provides uniform rental programs to businesses across the size spectrum, mostly in North America. The firm is by far the largest provider in the industry. Facilities products generally include the rental and sale of entrance mat, mops, shop towels, and restroom supplies. Cintas also runs a first aid and safety services business (10% of sales), a fire protection services business (6% of sales), and a uniform direct sales business (4% of sales).

6800 Cintas Boulevard, P.O. Box 625737
Cincinnati, OH, 45262-5737
T +1 513 459-1200
Sector Industrials
Industry Specialty Business Services
Most Recent Earnings Nov 30, 2020
Fiscal Year End May 31, 2021
Stock Type Cyclical
Employees 40,000