United Stationers Inc.
) recently posted impressive third-quarter results that included a
positive surprise of 8.3%. The company has now registered positive
earnings surprises in 4 of the last 5 quarters with an averaging
beat of approximately 3.5%. Earnings momentum for this Zacks #1
Rank (Strong Buy) wholesale distributor of business products has
been advancing since the announcement.
Moreover, compelling valuation metrics, including a price-to-book
(P/B) multiple of 1.68 and price-to-sales (P/S) ratio as low as
0.24, make USTR a promising value proposition for investors.
Profit Rises on Margin Expansion
On October 22, United Stationers reported third-quarter earnings of
91 cents per share, surpassing the Zacks Consensus Estimate of 84
cents. The result also surpassed last year's performance of 81
cents by 12.3%. Gross margin expansion and reduced interest
expenses, along with share repurchase activities, aided the
Net sales of $1,288.7 million dropped 1.6% from the year-ago
quarter and also fell short of the Zacks Consensus Estimate at
$1,328 million. It remained even with the prior-year quarter after
adjusting for one less selling day in the quarter. However,
management trimmed its sales growth forecast to between 1.5% and
2%, down from 2% to 3% projected earlier.
The company experienced sales growth of 7% and 2.3% year-over-year
in the industrial supplies and janitorial/breakroom categories,
respectively. Office products marginally increased by 1.3%. Sales
declined at the technology and furniture categories by 4.5% and
Gross profit margin expanded 56 basis points to 15.8% versus the
prior-year quarter due to lower cost of goods sold. Operating
margin remained flat at 4.9%.
Earnings Estimates on the Rise
The Zacks Consensus Estimate for 2012 rose 3.8% to $2.70 per share
over the past 30 days, as all 3 estimates were revised higher. The
current estimate implies year-over-year growth of 8.7%. For 2013,
the Zacks Consensus Estimate is up 4.1% to $3.03 per share,
suggesting year-over-year growth of 12.2%.
In addition to low P/S and P/B multiples, the stock looks
attractive with respect to a forward price-to-earnings (P/E)
multiple of 10.94 (lower than the peer group average of 11.31). A
P/E below 15.0, a P/S ratio less than 1.0 and a P/B ratio under 3.0
generally hint at a value stock. Volume is fairly strong, averaging
roughly 202K daily. The return on equity (ROE) also looks
attractive. It has a trailing 12-month ROE of 15.8% compared with
the peer group average of 11.9%. The company's PEG ratio of 1.0
stands on par with the benchmark indicator, and has a long-term
earnings growth projection of 11%.
A Look at Chart
A quick glance at the price and consensus chart reveals that the
stock price line remains below the 2012 and 2013 earnings estimate
lines, reflecting that the stock is still undervalued. Currently,
the stock price is in the range of $25.00-$30.00.
Founded in 1922 and headquartered in Deerfield, Illinois, United
Stationers is the wholesale distributor of business products in
North America. The company offers technology products such as
computer supply, peripheral products and computer hardware items.
It also distributes traditional office products that include filing
and record storage products, business machines, presentation
products, writing instruments, paper products etc. The company also
offers industrial supply items, such as hand and power tools;
safety and security supplies; janitorial equipment and supplies.
United Stationers, which primarily competes with Staples, Inc. (
), has a market cap of $1.19 billion.
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