Cintas (CTAS, Financial) saw its shares surge by 9% to over $700, marking a new all-time high, after unveiling impressive Q3 (February) earnings. This quarter marked the company's most significant EPS beat in the last six quarters, continuing a trend of double-digit EPS beats. The revenue increase was modest but still represented a larger upside than Cintas typically sees. A notable aspect of this report was the company's decision to raise its FY24 EPS and revenue outlook significantly, indicating strong confidence in future performance.
Observing Cintas's performance is crucial as it reflects broader business sentiment. Known as the largest work uniform supplier in the US, Cintas also generates over half of its revenue from facility services, including cleaning supplies and safety products. The Uniform Rental and Facility Services segment, in particular, reported a 9.4% year-over-year increase in revenue to $1.88 billion. Overall, the company achieved a record $2.41 billion in total revenue, a 9.9% growth, driven by robust new business acquisition.
The company's success spans multiple verticals, benefiting from its focus on specific industries, effective cross-selling strategies, and introduction of new products. This broad success contributed to significant improvements in profitability, with gross margins reaching a record 49.4%, up from 48.0% in the previous quarter. Notably, operating expenses, including energy costs, were lower year-over-year, enhancing cost efficiencies and supporting a 22.3% growth in EPS.
Cintas's performance this quarter underscores its strong business model, characterized by consistent, predictable revenue and the ability to drive higher margins through volume growth and cost efficiencies. The company's strategy of allowing businesses to outsource non-core functions continues to pay dividends, solidifying its position in the market.
