Cintas Corporation (NASDAQ: CTAS) in the second quarter of FY 17 has reported the adjusted earnings per share of $1.15 missing the analysts’ estimates of $1.16. But, the Revenues grew 6.4% to $1.3 billion compared to the corresponding period last year, slightly beating the analysts’ estimates of $1.29 billion.
Moreover, Cintas has upped its guidance for full-year FY 17, and expects the earnings per share to be in the range of $4.57 to $4.65, up from the previous guidance of $4.55 to $4.63. That new estimate is as per the analysts’ consensus view of $4.61. Moreover, CTAS has also upped the revenue guidance for FY 17 and expects it in the range of $5.180 to $5.225 billion, up from the previous guidance of the range $5.160 to $5.225 billion. The analysts are expecting $5.22 billion for revenue of the FY 17. CTAS had purchased G&K Services Inc at worth about $2.2 billion including the debt. The company had announced the deal in August and is expected to close by the second calendar quarter of 2017. The net income from continuing operations grew to $123.5 million, from $115.5 million in the corresponding period last year.
Moreover, Cintas enhanced the gross margin to 44.1% from 43.3% last year, which is the 13th consecutive quarter of year-over-year gross margin improvement.
Additionally, Cintas selling and administrative expenses as a percentage of revenue grew to 28.2% in the second quarter of FY 17 against 26.8% in the second quarter of FY 16. The increase is due to the strategic investments in a new enterprise resource planning system, in the national branding campaign (Ready for the WorkdayTM). Also, growth in the sales resources due to the recently acquired customers in the First Aid and Safety segment, and a 70 basis point increase in the medical expenses also contributed to this rise.
In October 2016, Cintas had said it would increase its annual dividend by 26.7% to $1.33 a share, which is the increased of dividend for 33 consecutive years. The dividend improved every year since the company went public in 1983.
Cintas stock has risen 20.6% in the last six months (as of 11:14AM EST; December 23rd, 2016; source: Google Finance). Investors could book profits in the stock and wait for further correction before reentering the stock.