02:49 PM EDT, 09/11/2024 (MT Newswires) -- Cintas ( CTAS ) will likely surpass fiscal first-quarter expectations and may raise its full-year earnings guidance, though quarterly incremental margins could be at the lower-end of management's guidance, RBC Capital Markets said.

The uniform supplier "has been a beat-and-raise story" that's expected to continue in the August quarter, RBC analyst Ashish Sabadra said in a note. The brokerage has a sector perform rating and a $725 price target on Cintas' ( CTAS ) stock, which implies downside from the current share price of $813.22 as of late afternoon trade.

The brokerage is estimating quarterly revenue of $2.5 billion, narrowly above the $2.49 billion consensus, but Sabadra said RBC "wouldn't be surprised" if Cintas ( CTAS ) tops both of those levels. RBC's $4.07 EPS target is above the market's $4.02 expectation.

"Given the solid execution, focus on recession-resilient verticals, and cross-selling, (Cintas ( CTAS )) should continue to deliver above-industry revenue growth," Sabadra said. Cintas ( CTAS ) has not confirmed a date for its first-quarter earnings but reported on Sept. 26 last year.

RBC expects first-quarter incremental margins to come in at the lower end of the company's 25% to 35% guidance due to the impact of one less working day that's expected to result in a 30 to 40 basis-point headwind to margins.

Further, a slowdown in the labor market and normalizing pricing could start to weigh on Cintas' ( CTAS ) organic growth going forward, the research report showed.

Cintas ( CTAS ) is more likely to increase its $16.25 to $16.75 full-year EPS guidance than its 6.4% to 8% organic revenue growth forecast, Sabadra wrote. With Cintas ( CTAS ) reporting organic revenue growth of 12.2% in fiscal 2023 and 8.1% in fiscal 2024, the upper-end of management's revenue range seems "appropriate," he said.

EPS should benefit from buybacks, accretive mergers and acquisitions, and operating leverage, according to RBC.

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