R.R. Donnelley (RRD): Printing just about everything but money

Posted Nov 2nd 2007 1:57PM by Larry Schutts
Filed under: Earnings Reports, Hewlett-Packard (HPQ), AT and T (T), Penney (J.C.) (JCP), Technical Analysis, Stocks to Buy

That brochure, catalog, magazine, annual report, directory or retail insert you read this morning was almost certainly prepared by a commercial printer. One of the most highly respected practitioners of the art is headquartered in Chicago.

R.R. Donnelley & Sons Company (NYSE: RRD) provides printing and print-related services to companies in the advertising, financial services, health care, retail and technology industries. Products include magazines, catalogs, books, advertising materials, business forms, financial reports and telephone directories. The firm also offers pre-press graphics and post-printing distribution services. Clients include AT&T (NYSE: T), Hewlett-Packard (NYSE: HPQ) and J C Penney (NYSE: JCP).

The company surprised the Street earlier in the week, when it reported Q3 EPS of 81 cents and revenues of $2.91 billion. Analysis had been expecting 74 cents and $2.89 billion. The CEO attributed success to increased productivity and to the firm's ability to leverage its global platform to drive efficiency. Management also guided FY07 EPS to $2.85-2.88, versus consensus of $2.80. The share price popped on the news and then moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys," two "buys" and three "holds." The RRD Price to Sales ratio (0.79), Price to Book ratio (2.10), Price to Cash Flow ratio (10.61), Price to Free Cash Flow ratio (18.94), Sales Growth rate (26.04%) and EPS Growth rate (20.90%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 90% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $32.59 and $45.25. A stop-loss of $34.90 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.

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Reader Comments (Page 1 of 1)

11-08-2007 @ 3:15PM

AHG said...

They print everything but a yellow page division (Dex Media East) in Colorado does not stand behind their product. After being proofread a Yellow Page ad was printed with typo. Company offered minimal reduction in cost of ad. They do not even respond to my request for a discussion now. Long time customer does not mean much ,I guess. I really do not want to pay for their mistake.