December 20, 2024
Cintas Stock Price Drops Despite Q2 Sales & Earnings Rise
Overall business was strong in the quarter, but a reported decline in direct uniform sales and warnings about pricing appear to have rattled some investors, analysts said.
Key Takeaways
• Strong Q2: Cintas (asi/162167) reported a 7.8% year-over-year sales increase in Q2, reaching $2.56 billion. The company also saw a 20% increase in net income.
• Stock Price Decline: Despite the positive financial results, Cintas’ stock price dropped following the earnings report. A decline in direct sales of uniforms and the potential for price increases to slow down contributed to the drop, analysts said.
• Revised Financial Forecast: Cintas raised its minimum revenue forecast for the fiscal year to $10.255 billion, up slightly from the previous projection of $10.22 billion. It also increased its earnings-per-share range to $4.28 to $4.34, surpassing the earlier estimate of $4.17 to $4.25.
The sales and profit gains keep coming for Cintas (asi/162167), but the company’s stock still dropped following its just-released second quarter financial earnings report.
The publicly traded corporation, which is a Counselor Top 40 promo distributor but is best known for its uniform rental and facility services, increased sales 7.8% year over year in the second quarter of its fiscal year to $2.56 billion. The tally includes all Cintas revenue – much more than just promotional products business.
Todd M. Schneider, Cintas (asi/162167)
Meanwhile, for the three-month Q2 period that ended Nov. 30, Cintas drove an annual-basis net income increase of about 20%, tallying $448.5 million in after-tax profit. That translated to second-quarter diluted earnings per share (EPS) of $1.09, up from $0.90 in the prior fiscal year’s second quarter.
Operating income for the second quarter of fiscal 2025 increased 18.4% to $591.4 million compared to $499.7 million in last year’s second quarter.
Still, the company’s stock price plunged 13% from a $210.31 high on Dec. 18, the day before the latest earnings announcement, to $182.79 by the close of Dec. 19 after the financial report came out.
Despite the strong overall top- and bottom-line results, analysts said the fact that Cintas reported a decline in direct sales of its uniforms and warned that increasing prices had become more difficult and that it’s likely price increases will come down appeared to have rattled investors a bit.
Nonetheless, Cintas still increased its minimum forecasted revenue total for the year from a previous projection of $10.22 billion to $10.255 billion. The high range of projected revenue remained the same as formerly forecast – $10.32 billion. Diluted EPS is now expected to sum up to a range of $4.28 to $4.34, better than a previous prediction of $4.17 to $4.25 for the entire fiscal year.
“Cintas delivered strong results in the second quarter, with robust year-over-year revenue and earnings growth, excellent margin expansion and strong cash generation,” said Cintas CEO Todd M. Schneider. “Our results reflect the exceptional execution of our employee-partners and the comprehensive value proposition we provide to our customers in supporting their image, safety, cleanliness and compliance needs.”
Cintas has consistently been generating gains in sales and earnings. The firm increased total company sales 8.9% on an annual basis to $9.6 billion during its 2024 fiscal year, which ended May 31. Net income increased 16.6% year over year to about $1.57 billion.
In the first quarter of its current 2025 fiscal year, which concluded with August’s end, Cintas saw sales jump 6.8% on an annual basis to $2.5 billion. For Q1, Cintas generated net income of $452 million, a 17.4% increase.
Based on estimated North American promotional product revenue of $218.6 million, Cintas ranked 13th on Counselor’s most recent list of the largest distributors in the industry.