Barclays Maintains an 'Underweight' on Cintas (CTAS); Strong 3Q Results, but Rising Energy and Cotton Prices to Hurt Margins
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Price: $203.79 +0.13%
Rating Summary:
13 Buy, 14 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
Rating Summary:
13 Buy, 14 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 8 | Down: 5 | New: 26
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Barclays maintains an 'Underweight' on Cintas (NASDAQ: CTAS), PT $25.
Barclays analyst says, "Last night, Cintas reported strong 3Q results, with revenue and margins nicely above estimates. CTAS raised its FY'11 revenue outlook and tightened the EPS higher, but also admitted that rising energy and cotton prices will hurt F4Q'11 and FY'12 margins."
"Cintas cautioned that higher energy costs will crimp 4Q'11 margins and sharply
higher cotton prices are likely to hurt margins in FY'12. We expect these costs to
largely offset op. leverage from rising FY'12 sales, and could even reduce margins if cotton remains elevated. �We are raising our FY'11/'12 EPS estimates by $0.09/$0.04 to $1.62/$1.79, or 8%/11% y/y growth, and our target by $1 to $25 (14.8x CY'11 EPS of $1.70)."
"We expect a slow profit rebound, and find CTAS expensive at 16.5x/14.9x C'11-'12 EPS, or a ~20% premium vs. S&P 500, and ~20x C'11-'12 free cash flow. We
reiterate our UW rating on CTAS, and prefer other Business Services stocks, including Overiweght/Neutral rated ManPower (NYSE: MAN) / Robert Half (NYSE: RHI) (better cyclical recovery plays) and ECL (high quality franchise with faster growth and better returns)."
For more ratings news on Cintas click here and for the rating history of Cintas click here.
Shares of Cintas closed at $28.14 yesterday.
Barclays analyst says, "Last night, Cintas reported strong 3Q results, with revenue and margins nicely above estimates. CTAS raised its FY'11 revenue outlook and tightened the EPS higher, but also admitted that rising energy and cotton prices will hurt F4Q'11 and FY'12 margins."
"Cintas cautioned that higher energy costs will crimp 4Q'11 margins and sharply
higher cotton prices are likely to hurt margins in FY'12. We expect these costs to
largely offset op. leverage from rising FY'12 sales, and could even reduce margins if cotton remains elevated. �We are raising our FY'11/'12 EPS estimates by $0.09/$0.04 to $1.62/$1.79, or 8%/11% y/y growth, and our target by $1 to $25 (14.8x CY'11 EPS of $1.70)."
"We expect a slow profit rebound, and find CTAS expensive at 16.5x/14.9x C'11-'12 EPS, or a ~20% premium vs. S&P 500, and ~20x C'11-'12 free cash flow. We
reiterate our UW rating on CTAS, and prefer other Business Services stocks, including Overiweght/Neutral rated ManPower (NYSE: MAN) / Robert Half (NYSE: RHI) (better cyclical recovery plays) and ECL (high quality franchise with faster growth and better returns)."
For more ratings news on Cintas click here and for the rating history of Cintas click here.
Shares of Cintas closed at $28.14 yesterday.
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