Story Stocks^®

Cintas (CTAS) is trading roughly flat after wrapping up FY25 on a bit of a lackluster note. It reported Q4 (May) EPS upside, but it was narrower than usual and followed a huge beat in Q3 (Feb). Revenue rose 8% yr/yr (+9% organic) to $2.67 bln, which was modestly above expectations. Probably the biggest issue was the guidance. With FY25 wrapping up, we got our first look at FY26 guidance. Revs were in-line, but EPS was below expectations.

• Cintas reached a milestone in FY25 as it reported its first-ever $10 bln revenue fiscal year and now it's expecting its first $11 bln year in FY26. The company is known for its stable revenue growth and consistent EPS growth. While it is not the fastest growing company we cover, it has been steady and consistent growth company. And that is a welcome characteristic given the current macro environment.
• We like to keep an eye on Cintas because it is a window into how businesses see their near term prospects. Cintas is more than just the largest supplier of work uniforms in the US, it also gets more than half of its revenue from facility services (cleaning supplies, mops, first aid cabinets, fire extinguishers, alarms etc.)
• Its Uniform Rental and Facility Services is the much larger segment of the two. Segment revenue rose 6.3% yr/yr to $2.03 bln. Other revenue, of which its First Aid segment accounts for a big part, rose 13.8% yr/yr to $637 mln. Cintas's reports follows a lackluster report from peer UniFirst (UNF), which recently reported a top line miss.
• Something that stands out to us is that Cintas is a highly profitable company. Operating margin in Q4 was a healthy 22.4%, up slightly from 22.2% in the year ago period. There are not a ton of non-tech companies boasting 22+% operating margins. Full year operating margin was 22.8% vs 21.6% in FY24. CTAS says its retention rates are right at all-time highs and pricing continues to be at historical levels.
• The caveat here is that the FY26 EPS guidance was below range despite in-line revenue guidance. That combination tells us management may be expecting some margin compression in FY26. Cintas said on the call that it has been spending on technology that makes it easier for its employee partners to do their jobs. This includes its SAP system and SmartTruck platform, investments in its infrastructure to increase capacity, as well as investments in management, trainees and selling resources.

Shares of Cintas have been trending lower since early June, which tells us investors were a bit nervous about what we may see for its FY26 guidance and that concern came to fruition with EPS being light. There have been a lot of press reports where companies are holding off on hiring new people until there is more clarity on the macro picture. On the call, CTAS said while it's not seeing a lot of change in terms of customer behavior, sales cycles, new business etc., there is more uncertainty in the marketplace due to tariffs. That was our concern coming into this report and we think that may have impacted guidance. Looking ahead, its peer Aramark (ARMK) reports on August 5.