RBC Capital Markets, LLC
Ashish Sabadra (Analyst)
(415) 633-8659, ashish.sabadra@rbccm.com
John Mazzoni (Senior Associate)
(212) 858-7271, john.mazzoni@rbccm.com
Outperform
September 2, 2021
Cintas Corporation
Dressed for Success - Premium Business, Premium
Valuation; Assuming Coverage at Outperform
Our view: CTAS is the market leader in the highly fragmented and large
$25bn uniform rental markets. Increased emphasis on health and hygiene
due to COVID should increase the propensity to outsource uniform rental
and adoption of facility services. In addition, Healthcare, education, and
government represent solid growth opportunities. Operating leverage,
pricing, vertical integration, and scale should help offset inflation
headwinds resulting in modest margin expansion. Conservative guidance
sets up for beat and raise while capital allocation could provide upside to
earnings guidance. We initiate at Outperform with a $450 price target.
Key points:
Dominant Market Leadership Position. CTAS has over 20% market share,
while Aramark and Unifirst have a roughly mid-single-digit market share.
Smaller local players and self-operated account for the remainder. Market
leadership helps provide increased route density driving better economics.
In addition, a vast array of products and services offers the ability to crosssell adjacent services. The company expects both First Aid and Fire to each
be a $1bn+ opportunity. Accordingly, we see the potential for HSD revenue
growth and double-digit EPS growth.
Large Fragmented and Underpenetrated Market. CTAS serves 1m+
businesses, and the company believes the total addressable market,
particularly for the facilities business, is 15m-20m businesses that it
currently doesn't service.
COVID Beneficiary. COVID-19 has increased focus on health, readiness,
and outsourcing non-core activities, which bodes well for CTAS given their
leading market position in Uniform as well as adjacent services.
Significant Cross-sell Opportunity. The company is less than 20%
penetrated among its existing customer base. Accordingly, CTAS can
leverage its leadership in Uniform rentals to offer a broad range of
commercial services such as floor care, restroom supplies, mats, mops,
first aid and safety products, fire extinguishers, testing & training, and
compliance courses.
Healthcare Opportunity. We estimate the domestic healthcare scrub rental
market for hospital workers that currently launder their own uniforms at ~
$1bn which provides a large opportunity for Cintas to convert self-managed
scrub programs.
ERP implementation to improve customer experience and back-end
operations. ERP should provide better visibility to laundering plant
stockroom inventories and improve working capital by managing supply
chain inventory. In addition, it should help target cross-selling, identify
pricing opportunities, and help digitize customer interactions.
Premium Valuation Warranted. Our $450 price target is based on 27x our
CY22E EBITDA and represents ~40x CY22E P/E at a premium to the peers
given superior execution, route density, as well as emerging opportunities
such as healthcare.
NASDAQ: CTAS; USD 396.53
Price Target USD 450.00
Scenario Analysis*
Downside
Scenario
Current
Price
Price
Target
Upside
Scenario
350.00
11%
396.53
450.00
14%
500.00
27%
*Implied Total Returns
Key Statistics
Shares O/S (MM):
Dividend:
107.7
3.00
RBC Estimates
FY May
Revenue
EBIT, Adj
EPS, Adj Diluted
P/AEPS
Revenue
2021
2022
2023
EBIT, Adj
2021
2022
2023
2021A
7,116.3
1,385.5
10.24
38.7x
Market Cap (MM):
Yield:
Avg. Daily Volume:
42,717
0.8%
344,522
2022E
7,630.7
1,547.0
10.70
37.1x
2024E
8,678.4
1,877.5
12.35
32.1x
2023E
8,137.1
1,732.4
12.08
32.8x
Q1
Q2
Q3
Q4
1,746.6A 1,757.0A 1,777.1A 1,835.7A
1,873.3E 1,892.8E 1,906.5E 1,958.1E
1,997.7E 2,019.6E 2,031.3E 2,088.5E
349.7A
377.7E
423.3E
352.9A
386.6E
430.2E
326.5A
385.5E
433.3E
356.4A
397.2E
455.7E
All values in USD unless otherwise noted.
Priced as of prior trading day's market close, EST (unless otherwise noted).
Disseminated: Sep 2, 2021 16:02EDT; Produced: Sep 2, 2021 16:02EDT
For Required Conflicts Disclosures, see page 15
Cintas Corporation
Key fundamental questions
Our view
What should we expect moving
forward in terms of capital
allocation?
We think the first priority is investment in organic growth initiatives such as
improving infrastructure or growing the customer base. The second is M&A followed
by return of capital to shareholders (most likely through a dividend or repurchase of
stock). The company has a strong balance sheet and cash flow profile, we would not
be surprised to see an acquisition to expand capabilities or within adjacent products/
markets, given the low leverage.
What is the mix of non-recurring vs
recurring sales with respect to the
pandemic?
CTAS expects lower sales surrounding pandemic-related PPE, albeit sales are slightly
elevated as compared to pre-pandemic levels. Our sense is that the sales cycle has
likely shortened (mainly at start of the pandemic) where decisions needed to be
made quickly (instead of the typical competitive process). With that said, we think
relationships were also strengthened during the pandemic (likely when competitors
failed to provide products and services). As a result, we think sales force productivity
is currently above trend. Moreover, we think the success of sales can be attributed
to high urgency and adaptability as well as the company providing products and
services during a difficult time.
What levers can the company pull
to help offset potential headwinds
associated with a difficult labor
environment and other inflationary
factors?
Labor is a big component of CTAS cost structure, and the company has been taking
measures to address labor rates for some time, which we think has put it ahead
of the curve. The company has been increasing labor rates over the past several
years, and doesn't expect higher wages to be a significant issue moving forward. The
company highlighted that hiring has slightly little more difficult in this tight labor
environment, but we note that the company raised wages rates during COVID (when
many other businesses chose to freeze wage rates) likely bodes well on the labor
front.
Is Cintas simply a levered jobs/
reopening story?
No, we believe the company has many more facets than jobs, where the increased
focus on hygiene and safety post COVID will likely provide durable tailwinds for years
to come. Moreover, we see adjacent opportunities such as healthcare providing
ample runway for white space and further room for share gains.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
2
Cintas Corporation
Key ESG questions
This section is intended to highlight key ESG discussion points relevant to this company, as well as our views on the outlook. Both the questions
we highlight and our responses will evolve over time as the dialogue between management, analysts and investors continues to advance. We
welcome any feedback on the topics.
Our view
How is the company addressing
diversity, equity, and inclusion?
The company has four Employee-Partner Business Resource Groups that provide
platforms for skills, experience and perspectives to be seen amongst women, African
Americans, Hispanic and Latin Americans, and military and veteran employeepartners. Also, the company has shifted focus to the Management Trainee program
that has enabled it to find the best talent for the leadership pipeline, while
continuing to monitor representation across board and manager positions. Reliance
on a supplier network fueled by women-owned and ethnically diverse businesses
helps to enrich product and service offerings.
Does the company integrate ESG
considerations into its strategy?
Yes, and an example can be seen with the company's Preparedness Plan
implemented in response to COVID-19 which helped it implement physical barriers,
social distancing, Personal Protective Equipment, and other hygiene regimes. The
company also donated over 200,000 face masks and other safety supplies to
different schools and organizations including essential products such as cleaning
supplies, disinfectant services, hand sanitizer and face shields.
Another way the company integrates ESG into its strategy is through its focus on
climate change. Through energy efficiency initiatives, the company notes a 10%
reduction in energy use by rental operations, and the Cintas laundry process is
55% more energy efficient and 42% more water efficient than home laundry. TRSA
reporting indicates Cintas has 10% lower emissions than the industry average with
30% less energy usage when compared to peer companies.
What is diversity like at board /
management level?
2 out of 8 board members are women and 0 out of 5 senior management are women,
which we think can be improved upon.
What are the most material ESG
issues facing this company?
Cintas is focused on ESG issues such as energy and water consumption, waste
production, and safety and health. In 2020, the company implemented energyefficiency initiatives into its operations to reduce energy use, as well as returned
~90% of water withdrawals back to the environment. Also, more than 100 US
locations received the "VPP Star Recognition for Workplace Safety” from OSHA for
occupational safety and health practices.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
3
Cintas Corporation
Positives
Recovery tailwinds
Uniform business revenue, particularly the direct business, has been impacted by COVID-19;
however, it should benefit from the reopening of the economy. The company delivered robust
growth in 4Q21 driven by easy comparable and reopening of the US economy. Opening of the
Canadian economy and increased hiring in the US bode well for further improvement going
forward.
Pricing opportunity
We note that CTAS hasn’t raised prices in the last ~2 years in the rental business; where we see
room for price increases (evaluated locally) given the current inflationary pressures. With that
said, we note that the company has been more active with price increases historically, and we
see COVID-19 as a one-off event where pricing was put on pause due to the pandemic.
Increased focus on health and hygiene
COVID has increased the importance of health, hygiene, and safety which should drive strong
demand for hygiene products such as disinfectants and hand sanitizers and greater demand for
cleaning and hygienically laundered services.
Market leadership position
CTAS is the market leader in the highly fragmented and large $25bn uniform rental market. CTAS
has over 20% market share, while Aramark and Unifirst have a roughly mid-single-digit market
share. Smaller local players and self-operated accounting for the remainder. Market leadership
helps provide increased route density driving better economics. In addition, a vast array of
products and services offers the ability to cross-sell adjacent facility services.
Large fragmented and underpenetrated market
CTAS serves 1m+ businesses, and the company believes the total addressable market,
particularly for the facilities business, is 15m-20m businesses that it currently doesn't service.
COVID-19 has increased focus on health, readiness, and outsourcing non-core activities, which
bodes well for CTAS. In addition, renting health care scrubs and isolation gowns is indicative of
a broad uniform rental opportunity.
Significant cross-sell opportunity
The company is less than 20% penetrated among its existing customer base driving increased
cross-sell opportunities. CTAS can leverage its leadership in Uniform rentals to offer a broad range
of commercial services such as floor care, restroom supplies, mats, mops, first aid and safety
products, fire extinguishers and testing, and training and compliance courses.
Fire Protection Services opportunity
Fire Protection Services is a fragmented market with small and regional players. As a result, there
is an opportunity for CTAS to consolidate the market. The company expects both First Aid and
Fire to each be a $1bn+ opportunity. Fire business organic revenue increased 22.4% y/y in 4Q21,
off of an easy comp (down 11.5%) We see the business as a low to mid-teens grower long-term
and note that the business was highly impacted in 4Q20 and moderately impacted in 1Q21 and
1Q22.
Diversified recurring stable revenues provide high revenue visibility
CTAS revenues are highly diversified with 1m customers. The rental revenues are recurring,
which provides high revenue visibility. More than half of the company revenues are from facility
services, including hygiene, floor care items such as walk-off mats and dust mops, cleaning tools
like microfiber mops and towels, first aid cabinet services, personal protective equipment, and
fire protection services, including test and inspection of extinguishers and alarms.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
4
Cintas Corporation
COVID accelerates growth in Hygiene products; rental to improve with the reopening
Hygiene products, including soaps, air fresheners, sanitizing dispensers, increased from 14% of
revenues in 4Q20 to 17% in 4Q21. Catalog business, the small direct sale component of the
Rental business, also increased from 4% to 5%. Shop towels were steady at 4% of revenues. The
shift was offset by the decrease in Uniform rental revenues from 50% of company revenues in
4Q20 to 48% in 4Q21. Dust, which includes walk-off mats, mops, decreased modestly from 18%
of the mix in 4Q20 to 17% in 4Q21. Finally, linens decreased from 10% to 9% of revenues. The
decline in the latter three categories was predominantly due to the lingering COVID impact. We
expect these categories to continue to improve faster than the company growth as the economy
reopens.
Exhibit 1 - Uniform Rental & Facility Services: Reported revenue and growth (y/y)
($mm's)
.
Source: Company data, RBC Capital Markets
Exhibit 2 - First Aid & Safety Services: Reported revenue and growth (y/y)
($mm's)
.
Source: Company data, RBC Capital Markets
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
5
Cintas Corporation
Exhibit 3 - All Other (Fire, Uniform Direct Sales): Reported revenue and growth (y/y)
($mm's)
.
Source: Company data, RBC Capital Markets
COVID expands Healthcare vertical opportunity
The Healthcare vertical has expanded from a low-single-digit percentage of revenues to ~7%
over the last decade, driven by vertical-specific solutions and leveraging specialized sales teams.
Healthcare-related revenue has been a mix of maintenance uniforms, scrub rental, and towels/
mops for cleaning. Similar to other verticals, there could be increased outsourcing opportunities.
In addition, there are opportunities to sell adjacent products and services such as PPE, hygiene
products, sanitizer, fire protection services, etc. Growth in the healthcare vertical will further
lower the cyclicality in the business.
Dedicated sales force to help expand presence in Education vertical
The company sees a big opportunity in schools where penetration has been low. Cintas has
dedicated sales to sell into schools, and opportunities include sanitizer, restroom supplies, first
aid, maintenance uniforms, and lab coats.
Scale delivers margin expansion opportunity
Higher route density along with cross-selling opportunities should help drive margin expansion.
The company operates 11,000 routes and adding new customers. The core uniform rentals
customers, facility services, first aid, and fire services should help improve route density. In
addition, there are opportunities for SG&A leverage as the add-ons products have minimal
incremental service costs. As a result, incremental margins are 20-30% compared to ~19%
operating margins in FY21.
Vertical integration offers scale benefits and competitive advantages
CTAS purchases fabric and operates five manufacturing facilities to produce some uniforms and
12 distribution centers. In addition, the company operates 212 rental processing plants that
house equipment required to clean uniforms and bulk items, such as entrance mats and shop
towels. Cintas also operates 61 first aid and safety and fire protection facilities and direct sales
offices.
Outsourcing trends to potentially accelerate post-COVID
60% of the uniform rental market is still self-operated, which provides significant growth
opportunities. Tight labor conditions and increased focus on health and hygiene will increase
the propensity to outsource.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
6
Cintas Corporation
Exhibit 4 - Uniform Rental Market Breakdown
.
Source: Company data, RBC Capital Markets
Mix shift towards services business
CTAS has shifted away from manufacturing towards services verticals, including Hospitality,
Healthcare, and Education. Services now account for ~70% of the customer base, and we expect
the percentage to increase going forward. Focus on increased manufacturing in the US and
Canada also bode well to improve revenue growth for the Uniform rental business.
ESG could serve as a potential catalyst for outsourcing
CTAS helps customers save water and energy due to efficient operations. In addition, the
company treats used water instead of just sending it into the sewer, and the garments
are recycled, saving landfill space. From a social perspective, its offerings help improve the
customers' employees' health, hygiene, and safety.
Multi-pronged benefits of ERP implementation
The company recently implemented SAP ERP, which allows the route drivers to process
transactions in real-time. The ERP should provide better visibility to laundering plant stockroom
inventories and improve working capital by managing supply chain inventory. CTAS is leveraging
data analytics and enhanced business reporting to analyze, process, and extract information and
target penetration, cross-selling, and pricing opportunities. Customers can order products and
services, pay bills, and communicate online, which should help improve customer retention.
Low leverage, robust free cash flow, and shareholder-friendly capital allocation
CTAS's leverage was 1.6x at the end of FY21, and the company repurchased 0.2m shares for a
total of $74mm in FY21. Historical FCF conversion (of Adjusted Net Income) has been 100%+
due to negative net working capital with $200 - $250mm of annual capex. We would not be
surprised to see an acquisition to expand capabilities or within adjacent products/markets given
low leverage. However, we do note that the company tends to prioritize return of capital given
high valuations. We note the company recently increased its buyback authorization to $1.5bn
after hiking its quarterly dividend by 26.7% to $0.95.
Solid acquisition track record
CTAS has grown through internal development and acquisition, such as White Fire Extinguisher
and ZEE Medical, which helped it expand into Fire Safety and First Aid. In addition, the G&K
Services acquisition helped consolidate the uniform rental market. Similarly, we believe there
could be further opportunities to expand into adjacent services, expand globally, and consolidate
the uniform rental market in the US.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
7
Cintas Corporation
The acquisition of G&K Services in 2016 increased route density opportunities and added
capacity in certain markets. In addition, the company was able to execute its playbook of crossselling adjacent products/ services into the customer base. As a result, the company delivered
$130-140m of cost synergies from production efficiency, route efficiency, G&A expense benefits,
and sourcing due to increased scale.
Solid long-term growth guidance
The company has consistently delivered on the guided mid-to-high single-digit revenue growth
with incremental operating margins of 20-30% and double-digit earnings growth during the
normal business cycle.
Conservative FY22 guidance
The company guided FY22 revenues in the range of $7.53 bn - $7.63bn (up 5.8% - 7.2% Y/Y)
despite easy comparison for the Uniform rental business due to difficult comparison and demand
slowdown for PPE. Importantly, Fire, First Aid, and Direct Sale businesses are expected to grow
high-single-digit. In terms of verticals, hospitality should benefit the most from the rebound in
Travel. Healthcare verticals should benefit from increased elective procedures partially offset by
difficult comparisons. In addition, the company expects to benefit from strength in Education
as students return to school and government vertical from the return to the office. Diluted EPS
in the range of $10.35 - $10.75 is expected to be negatively impacted by $0.85 due to a higher
tax rate (19.5% - 20.5% compared to 13.7% in FY21). The guidance does not include any future
share buybacks.
Exhibit 5 - NTM EV/EBITDA multiples
.
Source: FactSet, RBC Capital Markets
Exhibit 6 - NTM PE multiples
.
Source: FactSet, RBC Capital Markets
ARMK had negative EPS during COVID-19 and the outliers have been removed
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
8
Cintas Corporation
Exhibit 7 - RBC Estimates vs. Consensus
($mm's, except for per share figures)
.
Source: Company data, FactSet, RBC Capital Markets Estimates
Items to monitor
Difficult comparables for First Aid and Safety Services
First Aid and Safety Services benefited from solid demand for personal protective equipment,
including masks and gloves, during the COVID pandemic. The segment delivered double-digit
organic revenue growth throughout 2020 and through to 3Q21, which will result in difficult
comparables heading into FY22.
Margin pressure in First Aid and Safety Services
Gross margins for the First Aid segment were down 290bps in 4Q21 due to a mix shift towards
lower margin personal protective equipment (PPE). However, we expect gross margins to
improve going forward, driven by growth in first aid cabinet servicing business back to prepandemic levels.
Inflationary pressure
An increase in wages due to tight labor markets and higher material and fuel expenses could
potentially weigh on the margins; however, the company has guided to flat to 70bps of margin
expansion in FY22 driven by pricing increases and operating leverage from increased revenue
growth. In addition, SAP ERP implementation should help drive improved operating efficiency.
Change in workplace behaviors due to COVID
Greater workplace flexibility with more employees working from home/telecommuting could
reduce demand for uniforms/certain workplace services. In addition, a shift towards services
performed remotely or online sales could lower the demand for uniforms. However, we expect
this trend to be less pervasive in end markets in which Cintas serves.
COVID resurgence
Resurgence in COVID could negatively impact revenues if there is another round of lockdown.
However, we believe the demand for PPE and other health/sanitary solutions would increase
and help partially offset the headwinds.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
9
Cintas Corporation
Management
Management compensation includes cash salary, performance-based cash bonus, and long-term
equity. Farmer's cash bonus reflects EPS (41.75%), revenue growth (41.75%), and non-financial
component (16.5%), including safety, employee diversity, software implementation, and growth
metrics (16.5%); 2021 targets were EPS of $9.22 and revenue growth of 9.22% for the maximum
(200%) payout. Schneider's cash bonus reflects EPS (42.5%), revenue growth (42.5%), and nonfinancial goals (15%), including safety, employee diversity, software implementation, and growth
metrics.
Other NEO's bonuses are determined by EPS (50%) and individual performance evaluation (50%).
Long-term equity consists of EPS and revenue growth for the CEO; EPS, revenue growth and
income from operations for the COO; and EPS and individual achievement for other NEOs.
Cintas has a high degree of insider ownership, with Scott Farmer (Chairman of the Board and
CEO) owning ~15% of the company.
Scott D. Farmer – Former CEO & Chairman
Mr. Farmer joined Cintas in 1981, holding various positions including VP – National Account
Division, VP – Marketing and Merchandising, Rental Group VP, and COO. Mr. Farmer was elected
to the board in 1994 and CEO in 2003; he became Chairman of the Board in 2016 and currently
serves Cintas as Executive Chairman.
J. Michael Hansen – EVP & CFO
Mr. Hansen joined Cintas in 1995 with various positions, including First Aid Controller, Global
Accounts Controller, General Manager of the Cincinnati Fire Location, and Corporate Controller.
He was appointed VP Finance and CFO in 2015, SVP and CFO in 2016, and Executive VP and CFO
in 2018.
Todd Schneider – President & CEO
Mr. Schneider was appointed President and CEO and a member of the Board of Directors in June
2021, after previously being appointed Executive VP and COO back in 2018, and formerly serving
as the President & COO of the Rental Division as well as the Senior VP of Sales of the Rental
Division. In addition, Mr. Schneider has held various other roles within Cintas since joining in
1989.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
10
Cintas Corporation
Cintas Corporation
Income Statement
Fiscal Year Ended May 31 ($ millions, except per share data)
Uniform Rental & Facility Services
Other Services
Total Revenues
1Q21
2Q21
3Q21
4Q21
1Q22E
2Q22E
3Q22E
4Q22E
1Q23E
2Q23E
3Q23E
4Q23E
1Q24E
2Q24E
3Q24E
4Q24E
2020
2021E
2022E
2023E
2024E
1,394.4
1,410.5
1,417.9
1,466.9
1,504.6
1,519.1
1,524.2
1,568.1
1,606.9
1,617.8
1,620.2
1,665.3
1,716.1
1,723.0
1,722.3
1,768.6
5,643.5
5,689.6
6,116.0
6,510.2
6,930.0
352.2
346.6
359.2
368.8
368.7
373.7
382.3
390.0
390.8
401.8
411.0
423.2
414.3
432.0
441.9
460.2
1,441.6
1,426.7
1,514.8
1,626.9
1,748.4
$1,746.6
$1,757.0
$1,777.1
$1,835.7
$1,873.3
$1,892.8
$1,906.5
$1,958.1
$1,997.7
$2,019.6
$2,031.3
$2,088.5
$2,130.4
$2,155.0
$2,164.3
$2,228.7
7,085.1
7,116.3
7,630.7
8,137.1
8,678.4
3,522.5
Uniform Rental & Facility Services
715.4
739.8
761.9
766.4
781.4
788.1
789.5
811.6
825.9
828.3
830.4
852.1
876.6
874.3
873.2
898.4
3,055.1
2,983.5
3,170.6
3,336.7
Other Services
205.0
197.4
205.7
210.2
208.4
210.9
214.8
218.7
219.2
225.9
229.3
237.3
230.5
242.9
245.7
259.4
796.2
818.2
852.8
911.7
978.4
Total Cost of Services
920.4
937.2
967.5
976.6
989.8
998.9
1,004.3
1,030.3
1,045.1
1,054.3
1,059.7
1,089.4
1,107.1
1,117.2
1,118.9
1,157.8
3,851.4
3,801.7
4,023.4
4,248.4
4,500.9
3,407.5
Uniform Rental & Facility Services
679.0
670.7
656.0
700.4
723.1
731.0
734.7
756.5
781.0
789.5
789.8
813.2
839.6
848.7
849.1
870.1
2,588.4
2,706.1
2,945.4
3,173.5
Other Services
147.2
149.2
153.5
158.6
160.3
162.8
167.5
171.3
171.7
175.9
181.7
185.9
183.8
189.1
196.3
200.8
645.4
608.5
662.0
715.2
770.0
Total Gross Profit
826.2
819.9
809.5
859.1
883.5
893.9
902.2
927.8
952.7
965.4
971.6
999.1
1,023.4
1,037.8
1,045.3
1,070.9
3,233.7
3,314.7
3,607.3
3,888.7
4,177.5
Selling and Administrative Expenses
476.5
467.0
483.0
502.6
505.8
507.3
516.7
530.6
529.4
535.2
538.3
553.5
564.6
571.1
573.5
590.8
2,071.1
1,929.2
2,060.4
2,156.3
2,300.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
349.7
352.9
326.5
356.4
377.7
386.6
385.5
397.2
423.3
430.2
433.3
445.7
458.8
466.7
471.8
480.1
1,162.7
1,385.5
1,547.0
1,732.4
1,877.5
One-Time Items (Gains)
Income from Operations
Interest Income
(0.1)
(0.2)
(0.1)
(0.1)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Interest Expense
24.6
24.6
24.6
24.6
24.6
24.6
24.6
24.6
24.6
24.6
24.6
24.6
24.6
24.5
24.7
24.8
(1.0)
105.4
(0.5)
0.0
0.0
0.0
98.2
98.2
98.2
98.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Pretax Income
325.2
328.5
302.0
332.0
353.1
362.0
361.0
372.6
398.7
405.6
408.7
421.1
434.3
442.2
447.1
455.3
1,058.3
1,287.7
1,448.8
1,634.2
1,778.9
Income Taxes
25.2
43.7
43.6
64.3
70.6
72.4
72.2
74.5
79.7
81.1
81.7
84.2
108.6
110.6
110.0
106.4
181.9
176.8
289.8
326.8
435.5
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
300.0
284.9
258.4
267.7
282.5
289.6
288.8
298.1
319.0
324.5
327.0
336.9
325.7
331.7
337.1
348.9
876.4
1,111.0
1,159.0
1,307.3
1,343.4
Non-Operating Charges (Gains)
Income (Loss) from Shred-It Minority Stake
Income from Continuing Operations
Less Income Allocated to Participating Securities
2.2
2.0
1.9
1.5
1.5
1.5
1.5
1.5
1.5
1.5
1.5
1.5
2.0
2.0
2.0
3.0
8.2
7.6
6.2
6.2
9.0
Net Income Available to Common Shareholders
297.8
282.8
256.5
266.2
281.0
288.1
287.2
296.5
317.4
323.0
325.4
335.3
323.7
329.7
335.1
345.9
868.2
1,103.3
1,152.8
1,301.2
1,334.4
GAAP Earnings per Share, Diluted
$2.78
$2.62
$2.37
$2.47
$2.62
$2.67
$2.66
$2.75
$2.96
$2.99
$3.01
$3.11
$3.00
$3.05
$3.10
$3.19
$8.11
$10.24
$10.70
$12.08
$12.35
Shares Outstanding, Fully Diluted
107.1
108.0
108.0
107.7
107.1
108.0
108.0
107.7
107.1
108.0
108.0
107.7
108.0
108.0
108.0
108.3
107.1
107.7
107.7
107.7
108.1
Adjusted Results (ex Non-Recurring Items)
1-Time Operating Expenses (Gains)
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Operating Income, ex 1-Time Items
349.7
352.9
326.5
356.4
377.7
386.6
385.5
397.2
423.3
430.2
433.3
445.7
458.8
466.7
471.8
480.1
1,162.7
1,385.5
1,547.0
1,732.4
1,877.5
1-Time Non-Operating Charges (Gains)
Net Income, ex 1-Time Items (Continuing)
0.0
297.8
0.0
282.8
0.0
256.5
0.0
266.2
0.0
281.0
0.0
288.1
0.0
287.2
0.0
296.5
0.0
317.4
0.0
323.0
0.0
325.4
0.0
335.3
0.0
323.7
0.0
329.7
0.0
335.1
0.0
345.9
0.0
868.2
0.0
1,103.3
0.0
1,152.8
0.0
1,301.2
0.0
1,334.4
Diluted EPS, ex 1-Time Items
$2.78
$2.62
$2.37
$2.47
$2.62
$2.67
$2.66
$2.75
$2.96
$2.99
$3.01
$3.11
$3.00
$3.05
$3.10
$3.19
$8.11
$10.24
$10.70
$12.08
$12.35
Source: Cintas Corporation and RBC Capital Markets estimates.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
11
Cintas Corporation
Cintas Corporation
Balance Sheet
Fiscal Year Ended May 31 ($ millions, except per share data)
1Q21
2Q21
3Q21
4Q21
1Q22E
2Q22E
3Q22E
4Q22E
1Q23E
2Q23E
3Q23E
4Q23E
1Q24E
2Q24E
3Q24E
4Q24E
2020
2021
2022E
2023E
2024E
Current Assets:
Cash and cash equivalents
Marketable securities
Accounts receivable, net
Inventories
Uniforms & other rental items in service
Income tax and Deferred tax assets
Prepaid expenses and other
Total Current Assets
421.5
866.4
488.2
756.4
133.7
2,666.2
703.2
910.3
534.1
772.9
56.8
125.5
3,102.8
553.6
929.5
533.2
777.4
57.9
126.9
2,978.6
493.6
901.7
481.8
810.1
22.3
133.8
2,843.3
718.4
966.0
354.7
832.8
22.3
127.5
3,021.6
943.8
984.1
360.3
846.1
22.3
129.7
3,286.3
1,155.2
1,001.4
363.7
854.0
22.3
131.2
3,527.8
1,409.4
1,017.7
368.6
865.5
22.3
133.0
3,816.6
1,662.9
1,034.3
373.7
877.4
22.3
134.7
4,105.3
1,915.3
1,051.2
378.7
889.3
22.3
136.6
4,393.4
2,157.0
1,067.9
383.8
901.2
22.3
138.2
4,670.5
2,243.7
1,085.3
389.2
914.0
22.3
140.0
4,794.5
2,466.8
1,103.0
394.9
927.3
22.3
142.2
5,056.4
2,689.2
1,121.0
400.7
940.8
22.3
144.3
5,318.4
2,903.9
1,138.8
406.1
953.6
22.3
146.4
5,571.0
3,035.5
1,157.5
412.4
968.3
22.3
148.7
5,744.6
145.4
870.4
408.9
770.4
114.6
2,309.7
493.6
901.7
481.8
810.1
22.3
133.8
2,843.3
1,409.4
1,017.7
368.6
865.5
22.3
133.0
3,816.6
2,243.7
1,085.3
389.2
914.0
22.3
140.0
4,794.5
3,035.5
1,157.5
412.4
968.3
22.3
148.7
5,744.6
Property and equipment, net
Investments
Goodwill
Service contracts
Other Assets
Total Assets
1,378.4
240.4
2,886.0
441.6
430.7
8,043.4
1,344.3
252.5
2,889.8
430.9
434.5
8,454.8
1,329.9
264.6
2,895.3
418.3
460.9
8,347.5
1,318.4
274.6
2,913.1
408.4
478.9
8,236.8
1,318.4
274.6
2,913.1
408.4
478.9
8,415.1
1,318.4
274.6
2,913.1
408.4
478.9
8,679.8
1,318.4
274.6
2,913.1
408.4
478.9
8,921.4
1,318.4
274.6
2,913.1
408.4
478.9
9,210.2
1,318.4
274.6
2,913.1
408.4
478.9
9,498.8
1,318.4
274.6
2,913.1
408.4
478.9
9,787.0
1,318.4
274.6
2,913.1
408.4
478.9
10,064.0
1,318.4
274.6
2,913.1
408.4
478.9
10,188.0
1,318.4
274.6
2,913.1
408.4
478.9
10,449.9
1,318.4
274.6
2,913.1
408.4
478.9
10,711.9
1,318.4
274.6
2,913.1
408.4
478.9
10,964.5
1,318.4
274.6
2,913.1
408.4
478.9
11,138.2
1,403.1
214.8
2,870.0
451.5
420.7
7,669.9
1,318.4
274.6
2,913.1
408.4
478.9
8,236.8
1,318.4
274.6
2,913.1
408.4
478.9
9,210.2
1,318.4
274.6
2,913.1
408.4
478.9
10,188.0
1,318.4
274.6
2,913.1
408.4
478.9
11,138.2
Current Liabilities:
Accounts payable
Accrued compensation & related liabilities
Accrued liabilities
Income taxes, current
Deferred tax liability
Current portion of long-term debt
Total Current Liabilities
252.5
117.6
406.8
23.3
249.8
1,093.4
274.0
150.7
791.2
249.9
1,508.5
237.9
224.6
514.2
249.9
1,270.4
230.8
241.5
518.9
899.1
1,934.1
259.0
126.5
730.9
899.1
2,059.3
263.5
128.7
743.7
899.1
2,078.8
266.7
130.2
752.5
899.1
2,092.3
270.3
132.0
762.7
899.1
2,108.0
273.8
133.7
772.6
899.1
2,123.1
277.5
135.5
783.1
899.1
2,139.0
280.9
137.2
792.7
899.1
2,153.8
284.6
139.0
803.0
899.1
2,169.4
288.9
141.1
815.2
899.1
2,188.0
293.3
143.2
827.6
899.1
2,207.0
297.5
145.3
839.4
899.1
2,225.0
302.2
147.6
852.7
899.1
2,245.3
231.0
127.4
456.7
27.1
885.2
230.8
241.5
518.9
899.1
1,934.1
270.3
132.0
762.7
899.1
2,108.0
284.6
139.0
803.0
899.1
2,169.4
302.2
147.6
852.7
899.1
2,245.3
Long-term debt, net of current
Deferred income taxes
Accrued liabilities
Total Liabilities
2,290.4
385.1
547.9
4,438.6
2,290.9
376.4
563.5
4,856.8
2,291.4
389.6
460.6
4,531.0
1,642.8
386.6
454.6
4,549.0
1,642.8
386.6
454.6
4,543.4
1,642.8
386.6
454.6
4,562.9
1,642.8
386.6
454.6
4,576.4
1,642.8
386.6
454.6
4,592.1
1,642.8
386.6
454.6
4,607.2
1,642.8
386.6
454.6
4,623.1
1,642.8
386.6
454.6
4,637.9
1,642.8
386.6
454.6
4,653.6
1,642.8
386.6
454.6
4,672.2
1,634.4
386.6
454.6
4,682.6
1,682.2
386.6
454.6
4,748.5
1,662.5
386.6
454.6
4,749.1
2,539.7
388.6
498.5
4,434.7
1,642.8
386.6
454.6
4,549.0
1,642.8
386.6
454.6
4,592.1
1,642.8
386.6
454.6
4,653.6
1,662.5
386.6
454.6
4,749.1
Shareholders' equity
3,604.8
3,598.0
3,816.5
3,687.8
3,871.7
4,116.9
4,344.9
4,618.1
4,891.7
5,163.8
5,426.1
5,534.4
5,777.8
6,029.3
6,216.0
6,389.1
3,235.2
3,687.8
4,618.1
5,534.4
6,389.1
Total Liabilities & Shareholders' Equity
8,043.4
8,454.8
8,347.5
8,236.8
8,415.1
8,679.8
8,921.4
9,210.2
9,498.8
9,787.0
10,064.0
10,188.0
10,449.9
10,711.9
10,964.5
11,138.2
7,669.9
8,236.8
9,210.2
10,188.0
11,138.2
Source: Company reports and RBC Capital Markets estimates.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
12
Cintas Corporation
Cintas Corporation
Cash Flow Statement
Fiscal Year Ended May 31 ($ millions, except per share data)
1Q21
2Q21
3Q21
4Q21
1Q22E
2Q22E
3Q22E
4Q22E
1Q23E
2Q23E
3Q23E
4Q23E
1Q24E
2Q24E
3Q24E
4Q24E
2020
2021
2022E
2023E
2024E
Operating Cash Flows:
Net income
Depreciation
Amortization of intangibles
Stock based compensation
Deferred income taxes
Other
$300.0
60.6
35.6
29.1
(8.7)
0.0
$284.9
60.5
36.0
28.5
(14.4)
(18.0)
$258.4
61.0
36.1
25.8
(13.2)
(3.9)
$267.7
61.7
36.4
28.6
(6.0)
4.9
$282.5
63.6
35.6
30.5
0.0
0.0
$289.6
63.5
35.1
30.0
0.0
0.0
$288.8
64.1
34.6
27.1
0.0
0.0
$298.1
64.8
34.1
30.0
0.0
0.0
$319.0
66.8
33.6
32.0
0.0
0.0
$324.5
66.7
33.1
31.5
0.0
0.0
$327.0
67.3
32.6
28.5
0.0
0.0
$336.9
68.0
32.1
31.5
0.0
0.0
$325.7
70.1
31.6
33.6
0.0
0.0
$331.7
70.1
31.1
33.0
0.0
0.0
$337.1
70.7
30.6
29.9
0.0
0.0
$348.9
71.4
30.1
33.1
0.0
0.0
$876.0
235.9
143.1
115.4
(16.3)
9.2
$1,111.0
243.8
144.1
112.0
(42.2)
(16.9)
$1,159.0
256.0
139.4
117.6
0.0
0.0
$1,307.3
268.8
131.4
123.5
0.0
0.0
$1,343.4
282.3
123.4
129.7
0.0
0.0
Working Capital Gen. (Use)
Cash Flows from Operating Activities
(104.2)
312.3
(116.9)
260.7
(32.5)
331.9
62.5
455.9
30.0
442.2
25.0
443.3
15.0
429.6
46.4
473.4
30.0
481.4
25.0
480.8
15.0
470.3
(152.1)
316.4
30.0
491.1
25.0
490.9
15.0
483.3
(89.7)
393.8
(72.0)
1,291.5
(191.1)
1,360.7
116.4
1,788.4
(82.1)
1,749.0
(35.6)
1,843.1
(30.9)
(2.0)
0.0
(4.9)
(2.1)
(39.9)
(26.8)
(4.9)
23.4
(2.3)
(0.7)
(11.3)
(42.8)
(0.6)
9.1
(0.7)
(2.4)
(37.4)
(43.1)
(2.5)
(0.8)
3.6
(5.8)
(48.6)
(37.5)
0.0
0.0
0.0
0.0
(37.5)
(37.9)
0.0
0.0
0.0
0.0
(37.9)
(38.1)
0.0
0.0
0.0
0.0
(38.1)
(39.2)
0.0
0.0
0.0
0.0
(39.2)
(40.0)
0.0
0.0
0.0
0.0
(40.0)
(40.4)
0.0
0.0
0.0
0.0
(40.4)
(40.6)
0.0
0.0
0.0
0.0
(40.6)
(41.8)
0.0
0.0
0.0
0.0
(41.8)
(42.6)
0.0
0.0
0.0
0.0
(42.6)
(43.1)
0.0
0.0
0.0
0.0
(43.1)
(43.3)
0.0
0.0
0.0
0.0
(43.3)
(40.3)
0.0
0.0
0.0
0.0
(40.3)
(230.3)
(53.7)
13.3
(10.0)
(4.7)
(285.4)
(143.5)
(10.0)
31.7
(4.3)
(11.1)
(137.2)
(162.7)
0.0
0.0
0.0
0.0
(162.7)
(169.2)
0.0
0.0
0.0
0.0
(169.2)
0.0
0.0
72.1
0.0
0.0
35.4
0.0
0.0
12.5
0.0
0.0
9.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(112.5)
(200.0)
90.5
0.0
0.0
130.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1.5
276.1
0.0
281.6
0.6
(149.6)
2.4
(60.0)
0.0
224.7
0.0
225.4
0.0
211.5
0.0
254.2
0.0
253.4
0.0
252.4
0.0
241.7
0.0
86.7
0.0
223.1
0.0
222.5
0.0
214.7
0.0
131.6
(2.1)
48.8
4.6
348.2
0.0
915.8
0.0
834.2
0.0
776.0
Cash Flows from Investing:
Capital Expenditures
Acquisition of businesses, net of cash acq.
Proceeds from sale of marketable securities/assets
Purchase of marketable securities
Other
Other Cash Flows from Investing
Financing Cash Flows:
Proceeds from issuance of debt
Repayment of debt
Issuance of common stock (incl. exercise of SBC)
Effect of Exchange Rates on Cash
Increase (Decrease) in Cash & Equivalents
Cash & Equivalents, end of period
EBITDA
Free Cash Flow (After Capex, before Acquisitions)
Distributable Cash Flow (after Capex and Acquisitions)
EBITDA per Share
Free Cash Flow per Share
Distributable Cash Flow per Share
(152.6)
0.0
0.0
0.0
0.0
(152.6)
421.5
703.2
553.6
493.6
718.4
943.8
1,155.2
1,409.4
1,662.9
1,915.3
2,157.0
2,243.7
2,466.8
2,689.2
2,903.9
3,035.5
145.4
493.6
1,409.4
2,243.7
3,019.6
$445.9
$281.4
$279.4
$449.3
$233.9
$228.9
$423.6
$289.1
$288.5
$454.6
$412.9
$410.4
$99.2
$404.7
$404.7
$98.6
$405.4
$405.4
$98.7
$391.5
$391.5
$98.9
$434.2
$434.2
$523.6
$441.4
$441.4
$530.0
$440.4
$440.4
$533.2
$429.7
$429.7
$545.8
$274.7
$274.7
$560.5
$448.4
$448.4
$567.9
$447.8
$447.8
$573.1
$440.0
$440.0
$581.6
$353.6
$353.6
$1,541.7
$1,061.2
$1,007.5
$1,773.4
$1,217.3
$1,207.2
$1,942.4
$1,635.8
$1,635.8
$2,132.6
$1,586.2
$1,586.2
$2,283.2
$1,673.9
$1,673.9
$4.16
$2.63
$2.61
$4.16
$2.17
$2.12
$3.92
$2.68
$2.67
$4.22
$3.83
$3.81
$0.93
$3.78
$3.78
$0.91
$3.75
$3.75
$0.91
$3.62
$3.62
$0.92
$4.03
$4.03
$4.89
$4.12
$4.12
$4.91
$4.08
$4.08
$4.94
$3.98
$3.98
$5.07
$2.55
$2.55
$5.19
$4.15
$4.15
$5.26
$4.15
$4.15
$5.31
$4.07
$4.07
$5.37
$3.26
$3.26
$14.40
$9.91
$9.41
$16.47
$11.30
$11.21
$18.03
$15.19
$15.19
$19.80
$14.73
$14.73
$21.13
$15.49
$15.49
Source: Company reports and RBC Capital Markets estimates.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
13
Cintas Corporation
Target/Upside/Downside Scenarios
Investment summary
Cintas Corporation
475
450
425
400
375
350
325
300
275
250
225
200
175
150
125 Weeks
13APR19 - 03SEP21
TARGET
450.00
CURRENT 396.53
10m
5m
2019
2020
2021
AM J J A S O N D J F M A M J J A S O N D J F M A M J J A S
CTAS US
Rel. S&P 500 COMPOSITE
CTAS is well positioned to capitalize on the increased
emphasis on health and hygiene due to COVID, which
should increase the propensity to outsource uniform rental
and adoption of facility services. Healthcare, education, and
government represent solid growth opportunities. We see
cross-selling opportunities stemming from market leadership
and adjacent commercial products and services. Operating
leverage, pricing, vertical integration, and scale should
help offset inflation headwinds resulting in modest margin
expansion. Conservative guidance sets up for beat and raise
while capital allocation could provide upside to earnings
guidance. Moreover, we see an underlevered balance sheet
providing M&A optionality.
MA 40 weeks
Source: Bloomberg and RBC Capital Markets estimates for Target
Valuation
Our $450 price target is based on 27x our CY22E EBITDA
and represents ~40x CY22E P/E, at a premium to the peers.
We think a premium valuation is warranted given superior
execution, route density, as well as emerging opportunities
such as healthcare. Moreover, we believe that CTAS is a key
reopening beneficiary given the increased emphasis on health
and hygiene post COVID-19. Our price target supports our
Outperform rating.
Risks to rating and price target
Risks to our thesis include: 1) prolonged pandemicrelated economic slowdown and/or increased severity; 2)
deterioration in US economy; 3) potential for cost pressures to
linger/pressure incremental margins of 20-30%; 4) premium
valuation to peers sets high expectations
Upside scenario
Our upside scenario could result in ~8% upside to FY22
EBITDA. Applying an elevated multiple to our base case could
therefore translate to an incremental $50 of upside to our
current $450 price target, or a $500 price scenario. This
scenario includes a larger buyback as well as shorter/less
severe pandemic-related disruption.
Downside scenario
Our downside scenario could result in ~5% downside to FY22
EBITDA. Applying a lower multiple to our base case could
therefore translate to an incremental $100 of downside to
our current $450 price target, or a $350 price scenario. This
scenario includes a smaller buyback as well as longer/more
severe pandemic-related disruption.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
14
Cintas Corporation
Company description
Cintas Corp. designs, manufactures, and implements corporate identity uniform programs, provides entrance mats, restroom
supplies, fire protection, and first aid and safety services for more than one million businesses in various different industries. Cintas
went public in 1983 and is the largest company of its kind in the industry, with roughly $7.12 billion in FY21 revenue.
Cintas’s three main reporting segments:
• Uniform Rental & Facility Services
• First Aid & Safety Services
• Other Services (Fire, Uniform Direct Sales)
Uniform Rentals & Facility is by far Cintas’s largest segment, accounting for over 80% of total revenues and over 85% of total
operating income. Cintas generates the majority of its revenues from the U.S., and has a small Canadian operation.
Required disclosures
Conflicts disclosures
The analyst(s) responsible for preparing this research report received compensation that is based upon various factors, including
total revenues of the member companies of RBC Capital Markets and its affiliates, a portion of which are or have been generated
by investment banking activities of the member companies of RBC Capital Markets and its affiliates.
Please note that current conflicts disclosures may differ from those as of the publication date on, and as set forth in,
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DisclosureLookup.aspx?entityId=1 or send a request to RBC CM Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza,
29th Floor, South Tower, Toronto, Ontario M5J 2W7.
RBC Capital Markets, LLC makes a market in the securities of Cintas Corporation.
Explanation of RBC Capital Markets Equity rating system
An analyst's 'sector' is the universe of companies for which the analyst provides research coverage. Accordingly, the rating assigned
to a particular stock represents solely the analyst's view of how that stock will perform over the next 12 months relative to the
analyst's sector average.
Ratings
Outperform (O): Expected to materially outperform sector average over 12 months.
Sector Perform (SP): Returns expected to be in line with sector average over 12 months.
Underperform (U): Returns expected to be materially below sector average over 12 months.
Restricted (R): RBC policy precludes certain types of communications, including an investment recommendation, when RBC is
acting as an advisor in certain merger or other strategic transactions and in certain other circumstances.
Not Rated (NR): The rating, price targets and estimates have been removed due to applicable legal, regulatory or policy constraints
which may include when RBC Capital Markets is acting in an advisory capacity involving the company.
As of March 31, 2020, RBC Capital Markets discontinued its Top Pick rating. Top Pick rated securities represented an analysts best
idea in the sector; expected to provide significant absolute returns over 12 months with a favorable risk-reward ratio. Top Pick
rated securities have been reassigned to our Outperform rated securities category, which are securities expected to materially
outperform sector average over 12 months.
Risk Rating
The Speculative risk rating reflects a security's lower level of financial or operating predictability, illiquid share trading volumes,
high balance sheet leverage, or limited operating history that result in a higher expectation of financial and/or stock price volatility.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
15
Cintas Corporation
Distribution of ratings
For the purpose of ratings distributions, regulatory rules require member firms to assign ratings to one of three rating categories Buy, Hold/Neutral, or Sell - regardless of a firm's own rating categories. Although RBC Capital Markets' ratings of Outperform (O),
Sector Perform (SP), and Underperform (U) most closely correspond to Buy, Hold/Neutral and Sell, respectively, the meanings are
not the same because our ratings are determined on a relative basis.
Distribution of ratings
RBC Capital Markets, Equity Research
As of 30-Jun-2021
Investment Banking
Serv./Past 12 Mos.
Rating
Count
Percent
Count
Percent
787
575
51
55.70
40.69
3.61
318
173
4
40.41
30.09
7.84
BUY [Outperform]
HOLD [Sector Perform]
SELL [Underperform]
Rating and price target history for: Cintas Corporation, CTAS US as of 01-Sep-2021 (in USD)
19-Nov-2018
Rtg:I:O
Target: 215.00
21-Mar-2019
Rtg:O
Target: 218.00
11-Jul-2019
Rtg:O
Target: 258.00
17-Jul-2019
Rtg:O
Target: 267.00
24-Sep-2019
Rtg:O
Target: 275.00
17-Dec-2019
Rtg:O
Target: 282.00
13-Jan-2020
Rtg:O
Target: 283.00
19-Mar-2020
Rtg:O
Target: 220.00
13-May-2020
Rtg:O
Target: 250.00
11-Jun-2020
Rtg:O
Target: 318.00
23-Jul-2020
Rtg:O
Target: 347.00
23-Sep-2020
Rtg:O
Target: 360.00
450
400
350
300
250
200
Q2
Q3
22-Dec-2020
Rtg:O
Target: 405.00
2019
Q1
Q2
Q3
2020
Q1
Q2
Q3
2021
Q1
Q2
150
Q3
15-Jan-2021
Rtg:NR
Target: NA
Legend:
TP: Top Pick; O: Outperform; SP: Sector Perform; U: Underperform; R: Restricted; I: Initiation of Research Coverage; D: Discontinuation of Research Coverage;
NR: Not Rated; NA: Not Available; RL: Recommended List - RL: On: Refers to date a security was placed on a recommended list, while RL Off: Refers to date
a security was removed from a recommended list; Rtg: Rating.
Created by: BlueMatrix
References to a Recommended List in the recommendation history chart may include one or more recommended lists or model
portfolios maintained by RBC Wealth Management or one of its affiliates. RBC Wealth Management recommended lists include
the Guided Portfolio: Prime Income (RL 6), the Guided Portfolio: Dividend Growth (RL 8), the Guided Portfolio: ADR (RL 10),
and the Guided Portfolio: All Cap Growth (RL 12). RBC Capital Markets recommended lists include the Strategy Focus List and
the Fundamental Equity Weightings (FEW) portfolios. The abbreviation 'RL On' means the date a security was placed on a
Recommended List. The abbreviation 'RL Off' means the date a security was removed from a Recommended List.
Equity valuation and risks
For valuation methods used to determine, and risks that may impede achievement of, price targets for covered companies, please
see the most recent company-specific research report at www.rbcinsight.com or send a request to RBC Capital Markets Research
Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South Tower, Toronto, Ontario M5J 2W7.
Cintas Corporation
Valuation
Our $450 price target is based on 27x our CY22E EBITDA and represents ~40x CY22E P/E, at a premium to the peers. We think
a premium valuation is warranted given superior execution, route density, as well as emerging opportunities such as healthcare.
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
16
Cintas Corporation
Moreover, we believe that CTAS is a key reopening beneficiary given the increased emphasis on health and hygiene post COVID-19.
Our price target supports our Outperform rating.
Risks to rating and price target
Risks to our thesis include: 1) prolonged pandemic-related economic slowdown and/or increased severity; 2) deterioration in US
economy; 3) potential for cost pressures to linger/pressure incremental margins of 20-30%; 4) premium valuation to peers sets
high expectations
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RBC Capital Markets Policy for Managing Conflicts of Interest in Relation to Investment Research is available from us on request.
To access our current policy, clients should refer to
https://www.rbccm.com/global/file-414164.pdf
or send a request to RBC Capital Markets Research Publishing, P.O. Box 50, 200 Bay Street, Royal Bank Plaza, 29th Floor, South
Tower, Toronto, Ontario M5J 2W7. We reserve the right to amend or supplement this policy at any time.
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September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
17
Cintas Corporation
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Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
18
Cintas Corporation
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All rights reserved
September 2, 2021
Ashish Sabadra (415) 633-8659; ashish.sabadra@rbccm.com
19