Cintas Stock Sends a Clear Buy Signal as Momentum Builds

Cintas' (NASDAQ: CTAS) price action confirmed that its stock is a buy in September. The price action pulled back early in the month as part of a larger, long-term consolidation associated with post-stock-split activity. It confirmed a critical level later in the month, following the FQ1 earnings report, and is now set up to continue its consolidation.

Consolidation may persist for the next few quarters; the critical takeaway is that this must-own-quality dividend-growth stock tends to trend higher over time (up 300% in the last three years) and will likely exit consolidation and continue the trend sometime in 2026. 

Not only is the business growing and expected to sustain this growth through the end of 2026, but economic headwinds are also expected to ease, and tailwinds may emerge. The FOMC is on track to reduce rates by another 75 basis points before the middle of next year, which is expected to significantly impact global economic activity.

With Trump policies also anticipated to drive increased domestic economic activity, the tailwinds for Cintas’ business services could be substantial, including increased client counts and employee numbers at existing locations. 

Cintas Sustains Growth, Margin Strength, and Capital Position in Q1

The Q1 earnings report had only two issues: the company's performance was lackluster compared to analysts' forecasts, and the guidance was a bit tepid; however, every other detail is supportive of this market. The company grew its revenue by 8.8% to $2.72 billion, driven in part by acquisitions and in part by organic strength.

Acquisitions contributed nearly 100 basis points to growth, while organic strength was closer to 800 basis points. The revenue is better than expected compared to the consensus, but the margin of difference is slim at 70 bps and is offset by a weaker-than-expected profit margin. 

The profit margins were only a hair below forecasts, leaving the GAAP earnings at $1.20 or as expected relative to MarketBeat’s reported consensus. The critical details are that the gross and operating margins widened compared to the previous year, driving leverage growth in earnings at all levels.

The GAAP $1.20 is up more than 9.0% and strengths are expected to continue through year’s end. 

The guidance details are the same. The company raised guidance, expecting S&P 500-leading growth and margin strength, but the outlook is tepid compared to the analysts' forecasts.

Revenue aligns with the late-September consensus, while the midpoint of earnings is slightly below it, impacting the near-term sentiment but not the long-term outlook.

The long-term outlook is for Cintas to sustain a 7% revenue CAGR through the middle of the next decade and to widen margin incrementally each year. 

Cintas Capital Return Engine Drives This Market

Cintas is a capital-returning machine, whose dividend growth, distribution, and share buybacks have underpinned the stock price rally for years. They are not expected to end soon. The dividend yield is less than 1.0%, but it is a reliable payment and has grown annually at a high teen CAGR. 

The distribution growth pace isn’t expected to slow due to the earnings growth outlook and share buybacks, which reduce the count and offset the cost of distribution increases each quarter. The company has repurchased nearly 35% of its share count since the program began and is likely to repurchase a comparable amount over the next 10 to 15 years. 

CTAS Analysts and Institutions Drive Cintas Stock Price Action

Analysts and institutions are also bullish forces for CTAS price action. The analysts rate the stock as a Hold with a 50% Buy-side bias and have been increasing their price targets throughout the year. They forecast a 12% upside relative to the critical support target as of late September, while the trend is leading to a high-end of $257, another 10% upside when reached. 

Likewise, the institutions owning more than 60% of the stock have been buying robustly since just before the 2024 stock split, providing significant market support. MarketBeat data reveals the balance of activity exceeds five-to-one on a trailing 12-month basis.

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The article "Cintas Stock Sends a Clear Buy Signal as Momentum Builds" first appeared on MarketBeat.