Cintas (CTAS) shows good prospects, headwinds remain
On December 15, we published an updated research report on Cintas Company ETG.
Over the past six months, this Zacks Rank #3 (Hold) stock has returned 30.5% versus industry growth of 27.5%.
Cintas is poised to benefit from the gradual reopening of the majority of its customers’ businesses over the coming quarters. Additionally, the strength of the company’s health and hygiene end markets, driven by strong demand for its personal protective equipment, bodes well for its performance. This, together with the focus on improving the product portfolio, the strength of the supply chain and the distribution network, is likely to act as a tailwind.
Additionally, Cintas is focused on expanding its market share, product offerings and customer base through acquisitions. For example, its acquisition of Doritex Corp (February 2020) strengthened its offerings and customer base across Buffalo and the surrounding Western New York region. In particular, it invested $53.7 million in acquisitions in fiscal 2020 (ended May 2020), an increase from the $9.8 million used for buyouts in the prior fiscal year.
In addition, he remains committed to generously rewarding shareholders through dividend payments and share buybacks. In fiscal 2020, the company used $268 million to pay dividends and repurchase shares worth $464.5 million.
However, the difficult demand environment due to the issues related to the coronavirus epidemic could weigh on its overall performance in the short term. For the second quarter of fiscal 2020 (ending November 2020), the company forecasts revenue of $1.725 billion to $1.750 billion, suggesting a decline of 5.1 to 6.5 percent on an annual basis.
In addition, the company’s high debt profile is problematic. For example, over the last five fiscal years (2016-2020), its long-term debt has increased by 19.5% (CAGR). Notably, the metric remained high at $2,290.4 million at the end of the first quarter of fiscal 2021 (ended August 2020). Any further increase in the level of indebtedness may increase the financial obligations of the company.
Some top-ranked stocks in the Zacks Industrial Products sector are Altra Industrial Motion Corp. AIMC, Applied Industrial Technologies, Inc. AIT and Dover Corporation DV. While Altra Industrial currently sports a #1 (strong buy) Zacks rank, Applied Industrial and Dover have a #2 (buy) Zacks rank. You can see the full list of today’s Zacks #1 Rank stocks here.
Altra Industrial has achieved a positive earnings surprise of 50.07%, on average, over the past four quarters.
Applied Industrial has recorded a positive earnings surprise of 14.68%, on average, over the past four quarters.
Dover has recorded a positive earnings surprise of 18.10%, on average, over the past four quarters.
Zacks names ‘only one best choice for doubling up’
From thousands of stocks, 5 Zacks experts have each picked their favorite to skyrocket by +100% or more in the coming months. Of these 5, Research Director Sheraz Mian selects one to have the most explosive advantage of all.
You’ve known this company from its glory days, but few would expect it to be ready for a monster turnaround. Fresh off a successful repositioning and rife with A-list celebrity endorsements, it could rival or surpass other recent Zacks stocks which are set to double as Boston Beer Company which jumped +143.0% in just over of 9 months and Nvidia which exploded + 175.9% in one year.
Free: See our best stock and our 4 finalists >>
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
Cintas Corporation (CTAS): Free Inventory Analysis Report
Applied Industrial Technologies, Inc. (AIT): Free Inventory Analysis Report
Dover Corporation (DOV): Free Stock Analysis Report
Altra Industrial Motion Corp. (AIMC): Free Inventory Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research