Cintas Corporation (NASDAQ: CTAS) stock fell over 3.4% on September 26th, 2018 (as of 1:31 PM GMT-4; Source: Google finance) despite a decent result.
The company posted better than expected results for the first quarter of 2019. Net income from continuing operations for the first quarter of fiscal 2019 of $212.5 million increased 31.9% from last year’s first quarter net income from continuing operations of $161.1 million.
CTAS in the first quarter of FY 19 has reported the adjusted earnings per share of $1.89, beating the analysts’ estimates for the adjusted earnings per share of $1.80. The company had reported the adjusted revenue growth of 5.4 percent to $1.70 billion in the first quarter of FY 19, beating the analysts’ estimates for revenue by 0.63%. Operating income for the first quarter of fiscal 2019 of $265.2 million increased 6.5% from last year’s first quarter operating income of $249.1 million. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 5.2%. The organic growth rate for the Uniform Rental and Facility Services operating segment was 4.9%. The First Aid and Safety Services operating segment organic growth rate remained strong at 9.0%. The company expect the Uniform Rental and Facility Services operating segment organic growth rate to increase during the remainder of fiscal 2019. Operating income for the first quarter of fiscal 2019 was negatively impacted by $19.0 million in stock based compensation expense related to a change in the Cintas retirement policy in which the retirement age and tenure requirements were reduced. Operating income was also negatively impacted by integration expenses related to the G&K Services, Inc. (G&K) acquisition by $4.9 million in the first quarter of fiscal 2019 and $4.0 million in the first quarter of fiscal 2018.
Meanwhile, CTAS plans to start construction on its new facility in Delta Township, Michigan. The company currently operates in Michigan through six branches and five production facilities. The new Cintas facility will be a 55,000 square-foot laundry operation that will add approximately 60 jobs in sales, skilled, technical and office operations. However, Cintas believes transaction and integration expenses related to the G&K Services acquisition (March 2017), implementation cost associated with new enterprise resource-planning system, typical conversion costs and rental material expenses might dampen its margins in the upcoming quarters.
For FY 19, CTAS has raised revenue guidance from a range of $6.75 billion to $6.82 billion to a range of $6.80 billion to $6.855 billion and EPS from continuing operations from a range of $7.00 to $7.15 to a range of $7.19 to $7.29