Options Trade – Cintas Corporation (NASDAQ:CTAS) Calls
Sunday, March 16, 2014

**OPTIONS TRADE: Buy the CTAS May 2014 60.000 call (CTAS140517C00060000) at or under $2.00, good for the day. Place a protective stop limit at $0.80 and a pre-determined sell at $4.00.

by Ian Harvey

March 16, 2014

Introduction

Cintas Corporation (NASDAQ: CTAS), a uniform manufacturer, reports its fiscal Q3 earnings on March 18. The company will release its quarterly report after the market close, with analysts forecasting 70 cents per share. During the same period last year the company had earnings of 69 cents. The stock is slightly higher on the year, up 1.0% so far in 2014.

Investors are generally optimistic on Cintas, mainly due to recent and expected earnings growth. First, you can look back at its last report, when earnings came in 2.4% better than expected. In the upcoming earnings report, Wall Street has a set the rumored number for the quarter at 71 cents per share, which would mark a 3% increase from the same period last year. Full-year earnings are forecast to rise 11%. The stock has enjoyed strong gains over the last twelve months, but shares have been trading in a sideways pattern over the last few weeks ahead of its earnings report, which could finally allow the stock to regain its upward momentum.

Company Details

Headquartered in Cincinnati, Cintas Corporation provides highly specialized services to businesses of all types throughout North America. Cintas designs, manufactures and implements corporate identity uniform programs, and provides entrance mats, restroom supplies, first aid and safety products, fire protection services and document management services for over one million businesses.

Cintas is a publicly held company traded over the Nasdaq Global Select Market under the symbol CTAS and a component of the Standard & Poor’s 500 Index.

Key Statistics for CTAS

Current P/E Ratio (ttm) 22.6679
Estimated P/E(05/2014) 21.4250
Relative P/E vs. SPX 1.3373
Earnings Per Share (USD) (ttm) 2.6200
Est. EPS (USD) (05/2014) 2.7720
Est. PEG Ratio 1.9389
Market Cap (M USD) 7,117.89
Shares Outstanding (M) 119.85
30 Day Average Volume 686,883
Price/Book (mrq) 3.3129
Price/Sale (ttm) 1.6194
Dividend Indicated Gross Yield 1.30%
Cash Dividend (USD) 0.7700
Dividend Ex-Date 11/06/2013
5 Year Dividend Growth 10.38%
Next Earnings Announcement 03/20/2014

Technical Analysis

CTAS was recently trading at $60.18, down $3.10 from its 12-month high and $18.07 above its 12-month low. Technical indicators for CTAS are bullish and the stock is in a strong upward trend. The stock has support above $59.40 and resistance below $61.60.

Earnings

Cintas Corp. last issued its quarterly earnings data on Thursday, December 19th. The company reported $0.70 earnings per share (EPS) for the quarter, beating the consensus estimate of $0.68 by $0.02. The company had revenue of $1.14 billion for the quarter, compared to the consensus estimate of $1.13 billion.

During the same quarter last year, the company posted $0.63 earnings per share. Cintas Corp.’s revenue was up 7.5% compared to the same quarter last year. Analysts expect that Cintas Corp. will post $2.77 EPS for the current fiscal year.

Comparison

The closest competitor to CTAS that can be looked at to form clues regarding its upcoming report would be ARAMARK Holdings Corp. (ARMK), which reported back in mid-February. ARAMARK posted strong quarterly numbers, sending that stock higher. Its uniforms business was a major catalyst for the quarter, which bodes well for Cintas.

Analysts Opinions

Barclays boosted their target price on shares of Cintas Corp. from $58.00 to $65.00 in a research note issued on Tuesday, 21st January, 2014. The firm currently has an “equal weight” rating on the stock. Barclays’ target price points to a potential upside of 9.93% from the stock’s previous close.

Also, the company has been the subject of a number of research reports:-

• Analysts at Zacks reiterated a “neutral” rating on shares of Cintas Corp. in a research note to investors on Tuesday, December 24th. They now have a $62.00 price target on the stock.

• Separately, analysts at Ned Davis Research upgraded shares of Cintas Corp. from a “neutral” rating to a “buy” rating in a research note to investors on Monday, December 23rd.

• Finally, analysts at Bank of America Corp. reiterated an “underperform” rating on shares of Cintas Corp. in a research note to investors on Friday, December 20th. They now have a $54.00 price target on the stock, up previously from $46.00.

One research analyst has rated the stock with a sell rating, six have given a hold rating and three have issued a buy rating to the company’s stock. Cintas Corp. has a consensus rating of “Hold” and an average price target of $56.22.

Conclusion

Expect a solid report from CTAS, and it is believed that the report should help the stock break out of its current sideways pattern and trade up to test its 52-week high.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE: Buy the CTAS May 2014 60.000 call (CTAS140517C00060000) at or under $2.00, good for the day. Place a protective stop limit at $0.80 and a pre-determined sell at $4.00.



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