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Bank of America has a better-than-consensus outlook on the U.S. economy and thinks Cintas will be a major beneficiary as recession risks wane. Analyst Heather Balsky upgraded the stock to buy from neutral, calling Cintas a “best-in-breed company” and attributing the new rating to the firm’s growing confidence in a potential soft landing for the U.S. economy. Balsky’s $580 price target suggests shares stand to grow 16.5% from Monday’s close. “Cintas is the market leader in uniform rental and other facility services … since the global financial crisis, it has established an admirable record for strong execution and healthy capital returns,” Balsky said in a Tuesday note. “With BofA’s economics team no longer expecting a near-term recession, we’re more confident in Cintas’ sales and margin momentum.” Shares of the Ohio-based work uniform and services company have gained 10.2% this year. So far this month, the stock has shed about 1.3%. Balsky pointed to Cintas’ track record of beating and raising its earnings guidance, noting that the company beat the midpoint of its initial earnings per share guidance by 7% in fiscal 2022 and fiscal 2023. The firm’s earnings estimate for fiscal 2024 and fiscal 2025 are higher than the company’s guidance as well as Wall Street’s expectations, she said in the note . “We think Cintas is poised for EPS beats driven by sales and margin outperformance,” Balsky said. “It benefits from an ongoing secular shift to outsourcing, as well as its focus on route density and cost initiatives.” Balsky also lifted her sales growth estimates for fiscal 2024, with the firm’s outlook no longer factoring in modest pressure on Cintas’ uniform rental and first aid kit volumes driven by softer employment in a recessionary scenario. “COVID-related supply chain and labor market disruption increased businesses’ desire to outsource, and we think this will persist post-recovery,” the analyst said. — CNBC’s Michael Bloom contributed to this report.
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