Cintas Keeps Squeezing More Profit From Less Business

Source: Cintas.

Some of the best companies in the stock market are in businesses that most investors neglect. Cintas is a perfect example, with its specialty of putting its customers' employees into specialty uniforms opening the door to slow but steady long-term growth that has rewarded shareholders greatly over the years. Recently Cintas has seen its overall revenue growth slow down, but coming into Thursday afternoon's fiscal second-quarter earnings report, Cintas had managed to keep its profits moving in the right direction. Based on today's results, Cintas is still doing a great job of doing more with less, but long-term investors still have to ask how long the company can keep finding ways to boost its bottom line without bringing in more business. Let's look at Cintas and its results to find out what's happening with the uniform provider right now.

How Cintas polished its image yet againCintas produced headline numbers that were consistent with its recent history of results. On the revenue front, Cintas managed to bring in $1.12 billion, which was flat compared to the year-ago quarter. Moreover, when you exclude the impact of the document shredding business, for which the company didn't include any revenue this year, Cintas actually saw considerable growth of almost 7% compared to the second quarter of fiscal 2014.

Earnings looked even more favorable. Cintas earned $1 per share during the quarter, crushing last year's $0.69 per share of adjusted EPS from continuing operations. Even when you exclude the $0.14-per-share benefit from the sale of its document storage and imaging business, Cintas produced more than 24% growth in EPS from last year's figure.

Source: Cintas.

Looking in more detail at its business segments, Cintas got extremely good results from its uniform rental division as well as its first aid, safety, and fire protection segment. Uniform rental revenue climbed more than 8% on an organic basis, while the safety segment gained at an even more impressive 12% clip. Only the uniform sales front suffered, with a roughly 3% drop in organic revenue compared to last year's quarter.

For the most part, Cintas celebrated the results. CEO Scott Farmer believes that his employees "have executed our game plan very effectively, and we are focused on continuing these efforts during the second half of fiscal 2015."

Will things get even better for Cintas?

Even better for shareholders was the fact that Cintas raised its guidance for the full fiscal year. Now, Cintas expects to bring in between $4.45 billion and $4.5 billion in revenue for the year, with current investor expectations falling toward the bottom of that range. Cintas' earnings guidance was even more powerfully bullish, with new guidance of $3.49 to $3.54 per share easily topping the $3.15 per share that investors currently expect the company to produce.

Source: Cintas.

Yet Farmer was somewhat measured in his outlook. "We view the state of the U.S. economy as fairly fragile given numerous factors globally and within the U.S.," said Farmer in the company press release, "and are hesitant to turn too optimistic. However, we have been pleased with the recent U.S. economic performance and look forward to this current state continuing into the second half of our fiscal year." If that success does carry through in calendar 2015, then Cintas could easily get the support it needs to push even higher into record-high territory for its stock.

From a macroeconomic standpoint, the state of the U.S. employment market has been supportive for Cintas, which relies on hiring to help drive new uniform sales and rentals. With nonfarm payrolls soaring by 321,000 jobs in November, a healthy employment picture can only help Cintas going forward.

Cintas certainly made traders happy with its results, as the stock climbed more than 3% in after-hours trading within the first half-hour after the announcement. If the U.S. economy keeps firing on all cylinders, then Cintas should have plenty of potential to push to further highs for its share price in the weeks and months ahead.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Cintas. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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