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Cintas Corporation Beat Analyst Estimates: See What The Consensus Is Forecasting For Next Year

There's been a major selloff in Cintas Corporation (NASDAQ:CTAS) shares in the week since it released its third-quarter report, with the stock down 28% to US$175. Cintas reported US$1.8b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$2.16 beat expectations, being 7.5% higher than what the analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Cintas

NasdaqGS:CTAS Past and Future Earnings, March 21st 2020
NasdaqGS:CTAS Past and Future Earnings, March 21st 2020

Taking into account the latest results, Cintas's 13 analysts currently expect revenues in 2021 to be US$7.33b, approximately in line with the last 12 months. Statutory earnings per share are forecast to sink 11% to US$8.10 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$7.76b and earnings per share (EPS) of US$9.64 in 2021. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a substantial drop in earnings per share estimates.

It'll come as no surprise then, to learn thatthe analysts have cut their price target 25% to US$209. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Cintas, with the most bullish analyst valuing it at US$300 and the most bearish at US$149 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that Cintas's revenue growth is expected to slow, with forecast 0.9% increase next year well below the historical 11%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 5.0% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Cintas.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the negative side, they also downgraded their revenue estimates, and forecasts imply revenues will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Cintas's future valuation.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Cintas analysts - going out to 2022, and you can see them free on our platform here.

You still need to take note of risks, for example - Cintas has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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