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Donnelley Upgraded to Strong Buy - Analyst Blog

Posted
8/7/2013 6:40:00 PM
By: Zacks.com
Referenced Stocks:ATVI;BBSI;MCO;RRD

On Aug 3, 2013, Zacks Investment Research upgraded R.R. Donnelley ( RRD ) to a Zacks Rank #1 (Strong Buy). With a strong year-to-date return of 116.4% and a positive estimate revision trend, Donnelley is an attractive investment opportunity.

Why the Upgrade?

Impressive second quarter results, incremental revenue growth from acquisitions, robust logistics result and improving liquidity contributed to the upgrade. Additionally, Donnelley's multi-million dollar contract wins from various companies remain a major positive catalyst.

Donnelley reported second quarter earnings of 45 cents per share that comfortably surpassed the Zacks Consensus Estimate by a couple of cents. Revenues increased 1.7% year over year to $2.57 billion and exceeded the Zacks Consensus Estimate by approximately $30.0 million.

Donnelley's logistics business recorded robust organic revenue growth of 14.0% on a year-over-year basis, primarily driven by incremental revenues from acquisitions. Double-digit volume growth helped premedia revenues to grow 15.0% organically. Book directory and variable print unit organic revenues declined 2.4% and 0.6%, respectively in the quarter.

Donnelley reiterated its fiscal 2013 guidance. The company expects revenues to be in the range of $10.1 billion to $10.3 billion. The guidance assumes approximately $100.0 million negative impact from foreign exchange rates and lower paper sales.

The Zacks Consensus Estimate for fiscal 2013 increased 2.5% to $1.62 per share as most of the estimates were revised higher over the last 7 days. For fiscal 2014, the Zacks Consensus Estimate jumped 8.6% to $1.65 per share over the same period.

The long-term expected earnings growth rate for Donnelley is 7.5%.

Other Stocks to Consider

Investors can also consider other stocks that are doing well right now. These include Activision Blizzard ( ATVI ) , Barrett Business Services ( BBSI ) and Moody's Corp ( MCO ) . While Activision and Barrett carry a Zacks Rank #1 (Strong Buy), Moody's carries a Zacks Rank #2 (Buy).



ACTIVISION BLZD (ATVI): Free Stock Analysis Report

BARRETT BUS SVS (BBSI): Free Stock Analysis Report

MOODYS CORP (MCO): Free Stock Analysis Report

DONNELLEY (RR) (RRD): Free Stock Analysis Report

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Zacks Investment Research