I'm always surprised by how many people have never heard of Cincinnati-based Cintas (NASDAQ:CTAS), the nation's largest corporate uniform services provider, when I mention the company. Maybe that's just because it was such a popular place for my Miami University peers to interview before and after graduation. (I know which bowl game they'll be watching tonight!)
In the last 12 months, it's been enormously popular among investors as well. Shares of Cintas have risen steadily all year since a deep dive in mid-February following scaled-back revenue and earnings guidance for the close of fiscal 2003. A downbeat job environment is bad news for Cintas, which was counting on a quicker recovery. Attempts to regain volume by cutting prices, meanwhile, didn't work and were scrapped.
As a result, by the time full-year results -- which represented 34 straight years of revenue and net income growth -- hit the Street in July, investors were well prepared. Since then, Cintas shares have been strong performers and are now about flat with year-ago levels. (They have, however, lagged the S&P 500 over the past 12 months, as February's hole was just too deep to jump quickly out of.)
It's clear to see why investors are behind Cintas again. There's a huge opportunity for market share gains in this large, but fragmented business. The company leads, but estimates its share of the market at just about 9%. (No. 2 in the U.S. uniform-rental business is ARAMARK (NYSE:RMK), which is also a leading global foodservice company. Other notable peers are G&K Services (NASDAQ:GKSRA) and Alsco.) While traditional customers have cut back on workforce, Cintas has added new ones.
Cintas last night reported fiscal Q2 (ended Nov. 30) and six month results that revealed continued revenue and profit growth and an improved balance sheet. Last year's big acquisition, competitor Omni Services, is in the black. And free cash flow continued to flow inward even as accounting profits suffered, leading me to wonder what investors were so worried about back in February.
Ever had to wear a uniform -- jester caps don't count -- to work? Share your stories on our Cintas discussion board.
Dave Marino-Nachison can be reached at [email protected].
