Cintas is on track for in-line revenue for its fiscal third quarter, as headwinds from the previous quarter begin to ease, according to RBC Capital Markets. The brokerage predicts that Cintas will generate approximately $2.6 billion in third-quarter revenue, aligning with Wall Street's expectations.
RBC also anticipates earnings per share of $1.06, slightly above the Street's estimate of $1.05. Cintas is scheduled to disclose its financial results on March 26. The uniform supplier is expected to see organic revenue growth accelerate to 7.4% year over year, up from 7.1% reported in the second quarter.
This growth is attributed to gains in uniform rental services, first aid supplies, and fire protection. Nonetheless, direct sales of uniforms are projected to decline by 3% in the third quarter, according to RBC’s analysis. In the second quarter, Cintas' revenue suffered due to weaker catalog and direct sales; however, the company noted that its catalog services were performing robustly and that the overall macroeconomic environment remained stable.
RBC analysts Ashish Sabadra and David Paige remarked, 'While we expect previous headwinds to diminish, we will closely monitor any potential slowdown in uniform rental revenues resulting from softening employment trends.' Additionally, RBC is keeping an eye on the possible impacts of tariffs, but they expressed confidence that Cintas' adaptable supply chain will help to soften the long-term effects. Despite facing various challenges, Cintas is likely to achieve above-industry revenue growth and enhance its margins due to effective execution of its strategies, ongoing digital transformation efforts, and a focus on resilient vertical markets, as stated by RBC analysts. RBC believes that Cintas is 'more likely' to reiterate its full-year revenue growth forecast owing to a lack of significant mergers and acquisitions in the third quarter.
They project an annual organic revenue growth rate of 7.5%, surpassing Wall Street's expectations of a 7.3% increase. The analysts also indicated, 'We are optimistic that there will be an upward revision to the EPS guidance of $4.28 to $4.34, thanks to strong operating leverage and strategic share buybacks, which have not yet been factored into the forecast.' In January, Cintas publicly disclosed its intentions from November to acquire the smaller competitor UniFirst in an all-cash offer valued at approximately $5.3 billion; however, this proposal was rejected by UniFirst. Current Stock Price: $194.64, Change: -1.92, Percent Change: -0.98.