Exchange: NASDAQ | Sector: Industrials | Industry: Specialty Business Services
Q4 2024
Published: Jul 25, 2024
Earnings Highlights
Revenue of $2.47B up 8.2% year-over-year
EPS of $1.00 increased by 20% from previous year
Gross margin of 47.5%
Net income of 414.32M
""As we move into fiscal '25, we expect our revenue to be in the range of $10.16 billion to $10.31 billion, a total growth rate of 5.9% to 7.4%."" - Todd Schneider
Cintas Corporation (CTAS) Q4 FY2024 Earnings Review and Outlook: Record Quarterly Revenue, Margin Expansion, and Diligent Capital Allocation
Executive Summary
Cintas reported a strong finish to fiscal 2024 with notable quarterly momentum across all segments. Q4 2024 revenue reached $2.471 billion, up 8.2% year over year, supported by an organic growth rate of 7.5% after adjusting for acquisitions and currency effects. Gross margin rose 150 basis points to 49.2%, and operating margin expanded 160 basis points to 22.2%, driving fourth-quarter operating income of $547.6 million and net income of $414.3 million ($3.99 per diluted share, per the earnings call). For the full year, revenue was a record $9.6 billion, up 8.9% with organic growth of 8.0%, and full-year operating margin at an all-time high of 21.6%. Free cash flow amounted to approximately $591 million, underscoring Cintas’ ability to fund acquisitions, buybacks, and dividend growth while maintaining a strong balance sheet.
Management highlighted a durable value proposition across verticals (health care, hospitality, education, and government) and reiterated a disciplined capital allocation framework: technology and infrastructure investments (including SAP enhancements and partnerships with Verizon and Google), selective acquisitions ($186.8 million in fiscal 2024), dividend increases (17.4% in fiscal 2024, 40th consecutive year of dividend increases), and meaningful share repurchases (about $1 billion in 2024). Looking ahead, Cintas guided to over $10 billion in annual revenue for fiscal 2025, with a target of $16.25–$16.75 in diluted EPS and total revenue growth of ~5.9–7.4% (adjusted for two fewer workdays in FY25). Organic growth is guided to 6.4–8% with two fewer workdays dampening quarterly growth by roughly 160 basis points in the affected quarters.
Overall, the thesis rests on continued operating leverage from revenue growth, margin enhancement from efficiency initiatives and top-tier supply chain, and a favorable long-term view of market white space in outsourced uniform, safety, and facility services. Investors should monitor the pace of SAP-enabled optimization, the impact of the Fire Protection SAP deployment, pricing dynamics in a competitive market, and the trajectory of no-programmer customer wins as catalysts for continued upside.
Key Performance Indicators
Revenue
2.47B
QoQ: 2.69% | YoY:8.16%
Gross Profit
1.17B
47.50% margin
QoQ: 2.31% | YoY:7.80%
Operating Income
547.59M
QoQ: 5.14% | YoY:16.31%
Net Income
414.32M
QoQ: 4.21% | YoY:19.67%
EPS
1.02
QoQ: 4.08% | YoY:20.00%
Revenue Trend
Margin Analysis
Key Insights
Q4 2024 Revenue: $2.471B, YoY +8.16%, QoQ +2.69% (YoY and QoQ figures drawn from earnings data).
Full-year 2024 fundamentals
- Revenue: $9.6B, YoY +8.9%; Organic growth: 8.0%.
- Operating Income: growth +14.8% for the year; Operating Margin: 21.6% (all-time high).
- EPS: up 16.6% for the year.
- Cash flow from operations: >$2.0B for the year; Free Cash Flow (FY24): $591.1M.
- Balance sheet health: Total assets $9.48B; Total debt $2.668B; Net debt $2.327B; Current ratio 1.12; Debt to capitalization 0.382; Interest coverage ~22.7x.
Valuation and liquidity metrics (as context)
- Price/earnings ratio (T12M): ~41.5x; Price to book: ~15.95x; Cash position: $342M; Enterprise value multiple: ~106.5x (per the provided ratios snapshot).
- Dividend payout: 33.2% (of earnings) with a track record of annual increases; Dividend yield ~0.20% (per data).
Notes on guidance framework
- FY25 revenue guidance: $10.16–$10.31B; organic growth 6.4–8% after adjusting for completed acquisitions and constant currency; EPS guidance: $16.25–$16.75; FY25 effective tax rate guided at 20.4%; Two fewer workdays reduce quarterly growth by ~160 bps in the affected quarters; Capex target: ~3.5–4% of revenue.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.47B
8.16%
2.69%
Gross Profit
1.17B
7.80%
2.31%
Operating Income
547.59M
16.31%
5.14%
Net Income
414.32M
19.67%
4.21%
EPS
1.02
20.00%
4.08%
Key Financial Ratios
currentRatio
1.12
grossProfitMargin
47.5%
operatingProfitMargin
22.2%
netProfitMargin
16.8%
returnOnAssets
4.37%
returnOnEquity
9.6%
debtEquityRatio
0.62
operatingCashFlowPerShare
$1.71
freeCashFlowPerShare
$1.46
dividendPayoutRatio
33.2%
priceToBookRatio
15.95
priceEarningsRatio
41.54
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management insights and rationale from the Q4 FY2024 earnings call
- Strategy and growth: Todd Schneider emphasized the breadth of Cintas’ value proposition and the growth opportunity from the no-programmer segment, noting that “about two-thirds of our new customers come from no-programmers,” highlighting a significant white space opportunity. He also highlighted that FY24 revenue exceeded $9.6B and that the company expects FY25 revenue to exceed $10B as a demonstration of continued market resonance. Quote: “As we move into fiscal '25, we expect our revenue to be in the range of $10.16 billion to $10.31 billion, a total growth rate of 5.9% to 7.4%.”
- Margin expansion and operating leverage: Mike Hansen pointed to substantial margin expansion in Q4 (gross margin up 150 bps to 49.2%; operating margin up 160 bps to 22.2%), driven by top-line growth and efficiency gains from Six Sigma and SmartTruck. He also noted that the two-year SAP implementation and related logistics improvements underpin ongoing margin potential. Quote from CFO: “Our fourth quarter gross margin ... 49.2% ... an increase of 150 basis points.”
- Pricing dynamics and competition: Todd and Mike acknowledged a competitive pricing environment but emphasized moderation rather than price compression, stating that pricing has been moderated toward historical levels and that this has supported margin expansion (e.g., “we have continued to moderate pricing. Pricing is a local subject.” and “we were able to expand operating margins 120 basis points” despite pricing normalization).
- Capital allocation and M&A: Management underscored disciplined capital deployment—acquisitions totaling $186.8M in FY24, dividends up 17.4% for the year (40th consecutive year of dividend increases), and about $1B of share repurchases. They characterized M&A as opportunistic and timing-dependent, aiming to meaningfully broaden customer exposure and product capabilities.
- Technology and operations: The call highlighted SAP deployment (Fire division ongoing) and partnerships with Verizon and Google to drive productivity, along with operations improvements via SmartTruck and garment sharing, which support faster product delivery and lower costs. Management stressed sustained investments in technology and people to support growth.
"As we move into fiscal '25, we expect our revenue to be in the range of $10.16 billion to $10.31 billion, a total growth rate of 5.9% to 7.4%."
— Todd Schneider
"We've moderated pricing, and pricing is a local subject. It really depends upon the customers, what their operating environment's like, what their customer base is doing. But we continue to monitor that and manage it appropriately based upon our local businesses and making sure that we're meeting our customers' needs."
— Todd Schneider
Forward Guidance
Outlook and risk assessment for FY2025
- Revenue and earnings trajectory: FY25 revenue guide of $10.16–$10.31B implies organic growth of 6.4–8% after adjusting for completed acquisitions and currency effects, with diluted EPS guidance of $16.25–$16.75 (+7.3% to +10.6% CAGR). The two fewer workdays in FY25 create a headwind of approximately 160 basis points to quarterly growth, while the company anticipates further margin expansion through operating leverage and efficiency gains.
- Margin and cost dynamics: The expected margin expansion hinges on continued leverage of revenue growth, supply chain efficiencies, garment sharing via SAP, and further productivity improvements from SmartTruck. The Fire Protection SAP implementation may introduce some near-term margin pressure as training and process changes roll out, but should contribute to longer-term margin improvement. As noted by management, incremental margins are targeted in the range of roughly 25%–35% and could approach the high end as scale and scope increase.
- Capex and operating environment: Capex is expected to be in the 3.5%–4% of revenue range, reflecting investments in technology, infrastructure, and capacity. The compounding effects of strong cash flow, balanced capital allocation, and no-major macro disruptions underpin the outlook. Key risks include: (1) pricing pressure and bid cycles in a highly competitive market, (2) execution risk associated with the SAP Fire deployment, and (3) macro volatility impacting customer hiring dynamics or demand in certain verticals.
- Key monitorables for investors: (i) progress and ROI from SAP integration across Fire and other segments; (ii) trajectory of no-programmer penetration and its mix shift; (iii) quarterly impact of the 2 fewer workdays and any potential adjustments to guidance; (iv) trajectory of M&A activity and integration success; (v) inflation/cost dynamics and their effect on margin expansion; (vi) liquidity and cash flow generation to support continued buybacks and dividend growth.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
CTAS Focus
47.50%
22.20%
9.60%
41.54%
ABM
16.30%
0.88%
-0.66%
-71.65%
CPRT
41.90%
33.60%
4.29%
39.64%
DLB
88.80%
14.80%
2.36%
30.79%
RELX
62.40%
29.70%
26.20%
16.20%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Investment thesis for CTAS hinges on: (1) durable growth from a diversified, high-value services platform with substantial white space and deep cross-selling opportunities; (2) meaningful margin upside from operating leverage and SAP-enabled efficiencies, even as near-term drag from a SAP Fire rollout is absorbed; (3) strong cash flow supporting acquisitions and capital returns, backed by a conservative balance sheet and ample liquidity; (4) a long-standing track record of dividend growth and value creation for shareholders. The FY25 guidance reflects a prudent but constructive path to revenue above $10B and mid-to-high single-digit EPS growth, with the caveat of calendar-related headwinds and the ongoing SAP execution risk. Investors should monitor the progress of the Fire SAP implementation, the pace of no-programmer-driven growth, and the impact of competitive dynamics on pricing and retention. Given the company’s leverage, cash flow generation, and proven capital allocation strategy, CTAS presents a quality, growth-oriented exposure within Industrials with potential for margin upside as efficiency programs mature.
Key Investment Factors
Growth Potential
Long-run growth supported by a large white space (millions of small and mid-sized businesses) for outsourced uniforms and services, plus scalable verticals (healthcare, education, hospitality). No-programmer growth remains a meaningful driver of incremental revenue, with management highlighting that two-thirds of new customers originate from no-programmers, indicating a durable addressable market opportunity. The combination of SAP-enabled garment sharing, route optimization via SmartTruck, and continued technology partnerships positions Cintas to sustain above-GDP growth.
Profitability Risk
Key risks include price- and contract-bid sensitivity in a competitive market, execution risk from SAP Fire deployment, potential adverse macro shifts affecting workforce demand or customer spending, and potential dilution of top-line growth from ongoing integration complexity of acquisitions. The two fewer workdays in FY25 also pose a revenue growth headwind (approximately 160 bps) that could impact quarterly cadence and mix.
- Competitive dynamics and pricing: moderate pricing increases but potential bid pressure could compress margins if not offset by efficiency gains.
- SAP/Fires deployment: near-term margin pressure but long-term operating benefit is expected as processes stabilize and data visibility improves.
Financial Position
Solid balance sheet and cash generation underpin the risk-adjusted investment thesis. As of Q4 FY24, cash and cash equivalents totaled $342M; total debt stood at $2.668B with net debt around $2.327B; current ratio 1.12 and quick ratio 0.90 indicate adequate liquidity. Leverage supports a debt-to-capitalization ratio of 0.382 and an interest coverage of ~22.7x, underscoring ample debt capacity to fund acquisitions and buybacks. Free cash flow of $591M for the year demonstrates strong cash conversion and supports ongoing capital allocation priorities.
SWOT Analysis
Strengths
Large addressable market with a broad value proposition across Uniform Rental & Facility Services, First Aid & Safety Services, and Fire Protection (All Other).
Historically strong operating leverage and margin expansion from top-line growth and efficiency initiatives (e.g., Six Sigma, SmartTruck, garment sharing).
Robust cash generation and disciplined capital allocation: acquisitions, dividends, and buybacks.
Highly recurring revenue model with long-standing customer retention and a significant no-programmer growth engine.
Weaknesses
Near-term margin pressure from SAP Fire deployment and the transition-related costs.
Two fewer workdays in FY25 introduce negative quarterly headwinds (~160 bps) to revenue growth in affected quarters.
Valuation is elevated (P/E around 41.5x) reflecting premium growth and quality, which could pressure upside if execution stalls.
Opportunities
Sustained growth from healthcare vertical (now ~8% of revenue) with expansion into non-acute facilities and scrub rental programs.
Heightened white space with no-programmers and cross-selling across product lines.
Further margin expansion from SAP-based efficiencies, enhanced data analytics, and route optimization.
M&A opportunities in Fire Protection and related route-based segments to broaden product offerings and geographic reach.
Threats
Intense competition leading to pricing pressure or increased contract bidding.
Execution risk and cost overruns associated with the Fire SAP implementation.
Macro slowdown or volatility impacting customer capex, hiring, and demand across verticals.
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