Exchange: NASDAQ | Sector: Industrials | Industry: Specialty Business Services
Q3 2025
Published: Apr 3, 2025
Earnings Highlights
Revenue of $2.61B up 8.4% year-over-year
EPS of $1.13 increased by 16.3% from previous year
Gross margin of 50.6%
Net income of 463.50M
""We are updating our annual revenue expectations from a range of $10.255 billion to $10.32 billion to a range of $10.28 billion to $10.305 billion. Our organic revenue growth guidance is now to be in the range of 7.4% to 7.7%."" - Todd Schneider
Cintas Corporation (CTAS) QQ3 2025 Earnings Analysis: Sustained Margin Expansion, Strong Free Cash Flow and Steady Organic Growth in a Turbulent Macro
Executive Summary
- Cintas delivered robust Q3 FY2025 results with total revenue of $2.61 billion, up 8.4% year over year (YoY) and 7.9% organic growth when adjusted for acquisitions and FX. Segment performance remained strong across Uniform Rental, First Aid & Safety Services, and Fire Protection, contributing to a higher gross margin of 50.6% (all-time high) and operating margin of 23.4% for the quarter. The reported net income was $463.5 million and diluted EPS was $1.13, up 17.7% YoY. If you exclude a $15 million gain on the sale of property, adjusted operating margin was 22.8% (second-highest in company history).
Key Performance Indicators
Revenue
2.61B
QoQ: 1.85% | YoY:8.44%
Gross Profit
1.32B
50.57% margin
QoQ: 3.34% | YoY:15.00%
Operating Income
609.85M
QoQ: 3.12% | YoY:17.10%
Net Income
463.50M
QoQ: 3.34% | YoY:16.58%
EPS
1.14
QoQ: 2.70% | YoY:16.33%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $2.609B vs. $2.41B prior year; up 8.4% (YoY) with 7.9% organic growth; FX reduced quarterly growth by ~40 bps.
Gross margin: 50.6% (Q3 2025) vs. 49.4% prior year; +120 bps YoY; drivers include volume leverage, sourcing benefits, and technology-enabled efficiencies.
Operating income: $609.9M, =23.4% of revenue; +$89.1M YoY; adjusted margin (excluding a $15M gain) 22.8% (second-highest in history).
Net income / EPS: Net income $463.5M; diluted EPS $1.13, up 17.7% YoY; ex-fx/one-time gain, EPS would be $1.10.
Cash flow: Operating cash flow $622.0M in the first nine months; free cash flow $522.1M; capex ~$99.9M in Q3; free cash flow yield ~20% of Q3 revenue annualized.
Financial Highlights
- Revenue: $2.609B vs. $2.41B prior year; up 8.4% (YoY) with 7.9% organic growth; FX reduced quarterly growth by ~40 bps.
- Gross margin: 50.6% (Q3 2025) vs. 49.4% prior year; +120 bps YoY; drivers include volume leverage, sourcing benefits, and technology-enabled efficiencies.
- Operating income: $609.9M, =23.4% of revenue; +$89.1M YoY; adjusted margin (excluding a $15M gain) 22.8% (second-highest in history).
- Net income / EPS: Net income $463.5M; diluted EPS $1.13, up 17.7% YoY; ex-fx/one-time gain, EPS would be $1.10.
- Cash flow: Operating cash flow $622.0M in the first nine months; free cash flow $522.1M; capex ~$99.9M in Q3; free cash flow yield ~20% of Q3 revenue annualized.
- Balance sheet: Total assets $9.61B; net debt $2.45B; cash $243.4M; liquidity supported by strong EBITDA and cash generation.
- Guidance: FY2025 revenue now guided to $10.28B–$10.305B; organic revenue growth 7.4%–7.7%; FY2025 diluted EPS guided to $4.36–$4.40.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.61B
8.44%
1.85%
Gross Profit
1.32B
15.00%
3.34%
Operating Income
609.85M
17.10%
3.12%
Net Income
463.50M
16.58%
3.34%
EPS
1.14
16.33%
2.70%
Key Financial Ratios
currentRatio
1.72
grossProfitMargin
50.6%
operatingProfitMargin
23.4%
netProfitMargin
17.8%
returnOnAssets
4.82%
returnOnEquity
10.1%
debtEquityRatio
0.59
operatingCashFlowPerShare
$1.54
freeCashFlowPerShare
$1.29
dividendPayoutRatio
34.1%
priceToBookRatio
18.24
priceEarningsRatio
45.19
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Themes from management remarks and Q&A:
- Strategy & execution: Todd Schneider emphasized core culture as a competitive advantage and ongoing investments in SAP, SmartTruck, and other tech to improve route efficiency and customer experience. He noted that the company continues to realize benefits from technology and sourcing initiatives and that organic growth remains resilient across segments.
- Guidance & FX: Todd announced FY2025 revenue guidance narrowed to $10.28B–$10.305B and raised the annual EPS target to $4.36–$4.40, reflecting momentum but also ongoing FX headwinds. Mike Canton highlighted a ~40 bps FX impact in H2 and roughly 90 bps of M&A contributions, plus a one less workday in Q4 that will dampen sequential growth by ~160 bps.
- Market / pricing: Management stressed pricing at historic levels with no meaningful widening; the company continues to emphasize outsourcing as a means to manage cash flow for customers during macro uncertainty. They reiterated a focus on cross-selling and expanding the addressable market across verticals (healthcare, education, hospitality, etc.).
- M&A and capacity: The team remains active in tuck-ins across route-based segments and did not commit to UniFirst discussions; they reiterated disciplined capital allocation prioritizing reinvestment in the business and selective acquisitions.
"We are updating our annual revenue expectations from a range of $10.255 billion to $10.32 billion to a range of $10.28 billion to $10.305 billion. Our organic revenue growth guidance is now to be in the range of 7.4% to 7.7%."
— Todd Schneider
"The upcoming fourth quarter will have one less workday than last year's fourth quarter. This will negatively impact the fourth quarter total revenue growth by about 160 basis points."
— Mike Canton
Forward Guidance
- Revenue and growth outlook: FY2025 revenue guidance raised to a range of $10.28B–$10.305B, reflecting solid momentum with FX headwinds acknowledged. Organic revenue growth guidance is 7.4%–7.7% for the year, implying continued mid-tep performance through year-end.
- Earnings: FY2025 diluted EPS guidance increased to $4.36–$4.40, signaling improved profitability or leverage from operating performance and cost controls. Management indicated a 15%–16.1% earnings growth trajectory for the year.
- FX and calendar effects: Foreign currency headwinds are expected to persist in Q4 (~40 bps for revenue in H2 and about 160 bps impact from one fewer workday in Q4). The company remains cautious on FX but confident in its organic growth and margin expansion drivers.
- Investments and margins: Ongoing investments in SAP integration for Fire Protection and broader route-based segments, SmartTruck routing optimization, and disciplined buying/sourcing to support gross margin expansion. The marginal incremental margin target of 25%–35% remains an objective, with a $15M one-time gain from property sale in Q3 skewing reported margin metrics; excluding such items, operating margin is still among the top in company history.
- Key factors for investors to monitor: FX developments (particularly CAD/CAD movements), tariff exposures and supply chain diversification, uptime and efficiency gains from SAP/SmartTruck implementations, cross-sell penetration with a focus on recurring revenue streams (AEDs, eyewash, water break, privacy curtains in healthcare), M&A integration progress, and the pace of capital returns (buybacks) versus reinvestment needs.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CTAS Focus
50.57%
23.40%
10.10%
45.19%
ABM
12.60%
1.79%
0.26%
186.48%
CPRT
46.20%
38.80%
5.33%
34.16%
DLB
87.70%
12.70%
1.58%
49.30%
KMX
10.90%
-0.94%
2.02%
26.09%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
CTAS presents a compelling investment thesis anchored on durable, high-margin, route-based services with strong cash flow generation and a proven track record of operational improvement. The company’s 50.6% gross margin and 23.4% operating margin in Q3 FY2025 reflect efficient leverage from robust organic growth (7.9% ex-FX) and strategic cost management. Management’s guidance reinforces confidence in sustained mid-to-high single-digit organic growth and double-digit earnings expansion for FY2025, supported by ongoing technology investments (SAP, SmartTruck) and disciplined capex around 4% of revenue. The focus on cross-selling, healthcare/government verticals, and tuck-in acquisitions in North America should support margin resilience and revenue growth, while FX and calendar headwinds warrant caution in the near term. With a strong balance sheet, sizable FCF, and a history of thoughtful capital allocation (invest back in the business, selective acquisitions, and opportunistic buybacks), CTAS remains well-positioned to compound value through 2025 and beyond, albeit with elevated valuation metrics (P/E around the mid-40s) reflecting its premium growth profile in the Industrials/Specialty Services space.
Key Investment Factors
Growth Potential
- Cross-selling across rental and service lines (uniforms, facility services, first aid, fire protection) to lift wallet share per customer. Cross-sell success is already evident in higher-margin recurring streams (AED rentals, eyewash, water break).
- Healthcare, government/state & local (S&L) schools focus yields sticky, cost-lowering opportunities for customers, aided by embedded technology and centralized sourcing.
- SAP/SmartTruck-enabled route optimization and digital customer portals (MyCintas) can further improve customer retention, pricing realization, and service levels, supporting margin expansion and higher net revenue retention.
Profitability Risk
- FX and tariff exposure: FX headwinds and potential tariff shocks can erode reported revenue growth and margin if pricing power is constrained.
- Macro uncertainty: Economic softness or customer budgeting cycles can impact outsourcing adoption and discretionary spend; management notes a stable but uncertain macro environment.
- M&A reliance: While tuck-ins create value, integration risk and execution delay could temper margin expansion if acquisitions do not scale as envisioned.
- SAP implementation risk: SAP deployment in Fire Protection and other segments could temporarily pressure margins during transition; benefits are expected long term.
Financial Position
- Strong liquidity and leverage profile: Total assets $9.61B; cash $243.4M; total debt $2.69B; net debt $2.45B; current ratio 1.72; quick ratio 1.51; interest coverage ~24.6x.
- Free cash flow generation remains robust: nine-month free cash flow is $522.1M on $2.61B quarterly revenue run-rate, supporting investments in the business, M&A, and share repurchases when appropriate.
- Capital allocation framework prioritizes reinvestment in growth initiatives and selective accretive acquisitions, with a stated preference for returns to shareholders (dividends and opportunistic buybacks) and maintaining a strong balance sheet.
SWOT Analysis
Strengths
Market leadership in U.S./Canada/Latin America Uniform Rental and Facility Services
Strong recurring revenue streams (recurring-first aid, AEDs, eyewash, water break)
Material margin expansion driven by volume leverage, sourcing improvements, and Six Sigma/engineering initiatives
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