Can Cintas Get Its Starch Back?

All Bedraggled
The humdrum business of renting out uniforms -- to airlines, hotels, and supermarkets -- is a big moneymaker for Cintas (CTAS ). The largest U.S. uniform provider had revenues of $2.8 billion and profits of $272 million in 2004. More than 5 million workers wear its uniforms. But the stock has sagged, from 46 a share on Dec. 2 to 41 on Apr. 13, in part because of weaker-than-expected hiring. However, Bruce Simpson of investment firm William Blair, which owns stock and has done banking for Cintas, says shares have hit bottom. "The stock is the lowest in five years," he notes. The price has yet to reflect the "momentum in fundamentals that has been building for two years," he says.

The continuing recovery should boost employment, and Cintas' new products, such as fire safety gear and bathroom cleaners, are selling well. Leone Young of Smith Barney, which does banking for Cintas, rates it a buy and puts earnings at $1.73 in 2005, $2.03 in 2006, and $2.28 in 2007. Her price target: 55.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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