Why Cintas Corporation (NASDAQ: CTAS) stock is rising

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Cintas Corporation (NASDAQ: CTAS) stock rose over 5.2% on 25th September, 2019 (as of 10:32 am GMT-4; Source: Google finance) after the company has posted better than expected results for the first quarter of FY 20. The cash and equivalents at the end of August 31 was $102.1 million.

CTAS in the first quarter of FY 20 has reported the adjusted earnings per share of $2.32, beating the analysts’ estimates for the adjusted earnings per share of $2.14, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 6.7 percent to $1.81 billion in the first quarter of FY 20, beating the analysts’ estimates for revenue of $1.78 billion.

Uniform Rental and Facility Services segment posted the revenue of $1.45 billion, which is  an increase of 5.8%. Uniform Rental and Facility Services segment gross margin was 47.2% for the first quarter compared to 45.7% than last year’s first quarter, reflecting an expansion of 150 basis points. First Aid and Safety Services’ revenue for the first quarter was $172.1 million and the organic growth rate for this segment was 13.8%. The First Aid segment gross margin was 49% in the first quarter compared to 47.9% in last year’s first quarter, an increase of 110 basis points.

All Other revenue grew 8.8% to $184.5 million, an increase of 8.8%. The organic growth rate was 9.7%. The Fire business organic growth was at 12.5%. Uniform Direct Sale business had a good quarter too, posting an organic growth rate of 5.8%.

For fiscal 2020, the company expects revenue to be in the range of $7.28 billion to $7.32 billion. The company expect EPS to be in the range of $8.47 to $8.57. The company expects revenue to be in the range is 5.6% to 6.2%. An effective tax rate for fiscal ’20 is projected to be of 20.3% compared to a rate of 19.7% for fiscal ’19. The higher effective tax rate in fiscal 2020 negatively impacts EPS growth about 80 basis points and total EPS by about $0.06. CTAS expect fiscal ’20 Capita expenditure to be in the range of $280 million to $310 million. Fiscal  2020 operating income margin will be reduced by about 12.5 basis points, versus fiscal ’19 due to one less day of revenue. The negative impact on the margin occurs because certain expenses like amortization of uniforms and entrance mats are expensed on a monthly basis as opposed to on a daily basis.

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