There’s nothing uniform about CTAS’ premium growth; U/G to Buy, PO to $230

研报英文原文证据摘录

There’s nothing uniform about CTAS’ premium growth; U/G to Buy, PO to $230

Upgrade CTAS to Buy; PO to $230

We are upgrading Cintas to Buy and raising our PO to $230 following better than

expected fiscal 4Q26 results (see recap on pg. 5) as well as FY27 guidance that likely

leans conservative. We are incrementally more constructive on the setup for earnings

over the next several quarters as Cintas benefits from an improved backdrop in key labor

verticals, continues to drive impressive growth in adjacent product categories and is

generating outsized margin gains from a high focus on improving supply chain and

distribution efficiencies. With shares trading at a discount to the 5yr average (11%

lower), we see an opportunity for re-rating on better-than-expected results and as

investors give more credit for Cintas’ best in class execution, “all-weather” growth

model and durable HSD organic revenue expansion that continues to lead business

services peers.

We increase our PO to $230 (from $200) as we move our basis to align with 2027

calendar year end (fiscal 2Q27 ending in Nov. ‘28 for Cintas) from ‘27 fiscal year (ending

in May’ 27) previously and now based on 39x P/E (from 37x prior).

Upside opportunities start with the right adjacencies

Going into FY27, we remain constructive on several potential upside drivers. First, we

see continued strength in the high-margin First Aid segment after CTAS reported

organic growth of 13.2% in 4Q26 despite a difficult comparison (+18.5% in 4Q25, aided

by a one-time gain). Additionally, the segment’s gross margins grew 110bps y/y to

57.9% (from 56.8% in 4Q25). Growth remains supported by strong new business wins,

cross-selling within the existing customer base, and continued customer penetration

across a large and underpenetrated market.