) raised its outlook for the year in its third-quarter report,
which was also its seventh straight quarter with a positive
earnings surprise. Strong estimate revisions after the report
helped this business products and solutions provider achieve a
Zacks #2 Rank (Buy). Moreover, Deluxe's dividend yield of 3.30%
makes the stock quite attractive for investors.
Deluxe Reports Impressive Q3
On October 25, Deluxe reported third-quarter earnings of 85 cents
per share, exceeding the Zacks Consensus Estimate by 6.3% and
topping last year's performance by 9.0%.
Revenue grew 6.5% from last year, due mainly to a 14% increase in
small business services. This was partially offset by weakness in
both financial services (down 2.8% year over year) and direct
checks (down 8.1% year over year).
Operating profit jumped 11.0% year over year to $72.7 million, with
the operating margin expanding 70 basis points (bps) from the
comparable prior-year quarter to 19.2%.
In addition to the strong earnings growth, Deluxe's current
dividend yield is 3.30%.
Positive Outlook for Fiscal 2012
The impressive earnings prompted Deluxe to raise its fiscal 2012
outlook. Revenue is now expected between $1.508 billion and $1.515
billion, compared to the prior outlook $1.490 billion to $1.510
billion. Earnings are expected between $3.43 and $3.50 per share,
instead of $3.30 to $3.45.
The Zacks Consensus Estimate for 2012 advanced 2.1% over the last
60 days to $3.47 per share, while the Zacks Consensus Estimate for
2013 increased 2.3% to $3.61.
Historically, the stock price has been consistently below earnings
estimates, reflecting the fact that the stock is still undervalued.
Deluxe shares are currently trading at 8.8X forward earnings, a
discount to the industry average of 14.7X and the S&P 500
average of 15.8X. This indicates that the stock is undervalued.
Moreover, Deluxe's Return on Equity (ROE) of 50.0%, Return on
Investment (ROI) of 17.4% and Return on Asset (ROA) of 12.3% are
all better than the industry averages. Furthermore, its
price/earnings growth (PEG) ratio of 1.4 is lower than the industry
average of 2.5.
Deluxe Corporation, through its industry-leading businesses and
brands, helps financial institutions and small businesses better
manage, promote, and grow their businesses. The Company uses direct
marketing, distributors, and a North American sales force to
provide a wide range of customized products and services.
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