Core-Mark Holding Company Inc.
) recently posted second quarter 2012 adjusted earnings of 94 cents
per share, substantially lagging the Zacks Consensus Estimate of
$1.04. However, reported earnings were better than the year-ago
earnings of 81 cents per share. The results were driven by
double-digit growth in the top line and margin expansion.
The company, which distributes packaged consumer products to the
retail industry, reported net sales of $2.29 billion for the
quarter, up 12.1% year over year. The upside in revenue was mainly
attributable to expanded presence of the company in the southeast,
driven by the Couche-Tard contract in the third quarter of 2011 and
contributions from the Forrest City Grocery Company (acquired in
Sales at the Cigarette category rose 10.3% to $1.4 billion due to
an 8.8% rise in carton volume. However, excluding the contribution
from Forrest City and the new contract, cigarette sales rose only
1.2% due to a dip of 2.2% in Cigarette same store sales.
Sales at the Non-cigarette category crept up 16.5% to $710 million.
Excluding the new contract and Forrest City contribution,
non-cigarette sales rose 6.7% on the back of same-store sales
growth of 6% and additional customers.
During the quarter, adjusted gross profit expanded 11.7% to $123.7
million, attributed to an increase in cigarette and non-cigarette
Total operating expenses climbed 10.2% to $104.8 million due to the
Forrest City acquisition start-up costs, higher warehousing and
distribution expenses, and selling, general and administrative
expense. However, as a percentage of net sales, total
operating expenses fell 8 basis points, benefiting from increased
leverage on higher net sales.
Adjusted EBITDA surged 14.2% to $29.8 million in the reported
quarter, driven primarily by new business from the FCGC acquisition
and the new contract.
The company retained its outlook for 2012. For fiscal 2012, the
company continues to expect net sales of $9.0 billion, up 11.0%
year over year, owing to the benefits from the FCGC acquisition,
new contract wins, market expansion and vendor consolidation
initiatives. Earnings per share are expected to be in the range of
$2.75 to $2.90, and adjusted EBITDA is expected between $102
million and $105 million. The company expects capital expenditure
to be $30 million.
The company remains focused on opportunities, both in acquisitions
and in market share gains. However, cost inflation and intense
competition remains a headwind. Core-Mark, which competes with
Farmer Brothers Co. (
), currently has a Zacks #3 Rank, implying a Neutral rating over
the short term. We also reiterate our long-term Outperform
recommendation on the stock.
CORE-MARK HLDG (CORE): Free Stock Analysis
FARMER BROS CO (FARM): Free Stock Analysis
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