Another Solid Quarter In The Books For Cintas

Baird remains bullish on Cintas Corporation (NASDAQ: CTAS) following its better-than-expected results for the first quarter, driven by 5.7 percent organic growth and strong underlying margins.

The company reported first quarter earnings of $1.26 a share, well-exceeding expectations of $1.09. Buoyed by a strong quarter, Cintas raised F2017 EPS guidance by about $0.20/share to $4.55–$4.63.

Net, underlying guidance is about 3 percent higher, with revenue little changed ($5.16 billion–$5.225 billion, +$10 million at low end), which assumes 5.2–6.5 percent revenue growth and 11.2–13.2 percent EPS growth.

Related Link: Cintas Reports Q1 EPS $1.26 vs $1.08 Est, Revenue $1.29B vs $1.28B Est

"Commentary remains constructive and we gain incremental confidence in management execution, GK timeline remains on track, and our estimates are slightly higher, lending support to our longer-term recommendation, predicated on better-than-expected potential for GK revenue/cost synergies," analyst Andrew Wittmann wrote in a note.

Meanwhile, the Cintas' foray in to broader service offerings mitigates valuation and cycle concerns, while the analyst noted that the investors are underestimating the revenue synergies from the GK acquisition.

"While we continue to cite potential negative headline risk from a longer-than-expected regulatory review (increasingly expected, in our view), long-term opportunity trumps, particularly for existing holders and investors with multi-year investment horizons," Wittmann added.

Wittmann reiterated his Outperform rating and price target of $140.

At time of writing, shares of Cintas rose 2.72 percent to $116.51.

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