If you want a good sense of the improvement there has been in the labor market, take a look at the stock of Cintas (CTAS 124.37), a Cincinnati-based company that provides products and services that include uniforms, restroom supplies, fire extinguishers, and first aid kits.
Over the last five years, shares of CTAS have risen 216% before dividends. The fiscal third quarter earnings report the company delivered after Wednesday's close was yet another reminder of the solid manner in which the company is executing in a growing labor market.
Revenue for the third quarter was $1.28 billion, a 5.3% increase versus last year. Its organic growth rate, however, was even stronger at 6.5%. That growth rate is adjusted for the impacts of acquisitions, exchange rate fluctuations and differences in the number of workdays. Organic growth for its core Uniform Rental and Facility Services segment, which accounted for 78% of total revenue, increased 7.3%.
The third quarter marked the 14th consecutive quarter that Cintas achieved a year-over-year increase in its gross margin, which jumped 110 basis points to 44.2%. Gross margin for the Uniform Rental and Facility Services segment increased 100 basis points to 45.0%.
Cintas incurred higher SG&A expenses as a percentage of revenue due in part to increased expenses related to its acquisition of G&K Services, Inc., which was completed on Wednesday. Nevertheless, earnings per share from continuing operations increased to $1.08 from $1.05 last year. Excluding the impact of an accounting change for equity compensation and the G&K transaction expenses, earnings per share were $1.11, which was above analysts' average expectation.
Management said it expects to realize annual synergies in the range of $130 million to $140 million in the fourth full year following the G&K acquisition. It was said, however, that the company is pulling its guidance for the remainder of fiscal 2017 until it can confirm the integrated cost assumptions it has made for the G&K acquisition and can complete the purchase accounting process. Guidance will be provided when the impact of those items becomes clearer.
Shares of CTAS, which are up 7.6% year-to-date, traded 1.0% higher in Wednesday's after-hours session.