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Cintas Sold Off, Downgraded After Earnings Shortfall

December 29 2009 Tweet Email This

Shares of corporate uniform maker Cintas Corp. (Symbol: CTAS) traded down more than 10% after the company reported worse-than-expected earnings of $0.39 / share Tuesday after the bell. Investors had been expecting $0.43 / share. Among the primary reasons for the earnings shortfall were earnings from the company’s core uniform rental business, which came in well below expectations. Perhaps the economic downturn has caused employers to hold on to old uniforms longer. The stock was downgraded to Hold from Overweight at JP Morgan following the report, but was maintained at Hold by S&P.

CTAS’ chart is one that only a mother could love. After bouncing off its 50-day moving average last week, shares gapped all the way down to the 200-day MA for a one-day loss of 11.44%. In the spirit of the holidays, one might point to the fact that it held the 200-day MA on Wednesday and again on Thursday as a bit of a silver lining. Still, I would not recommend going near this stock until it shows some strength. If it could retrace about 50% of Tuesdays gap in the near-term, that would be a moderately bullish turn in favor of the stock.