Wednesday Night's Show Highlights:
Can an old-school company like R.R. Donnelly "print" money for your portfolio?... Yes!
Wednesday, July 30, 2014
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Jim: Can an old company learn new tricks? That's the question we need to ask about R.R. Donnelley & Sons, RRD, the 150-year-old company that's the largest player in the old-fashioned commercial printing industry with a bountiful 6% yield.
Yep, commercial printing, a business that may seem obsolete in our increasingly digital world, especially when you consider that this stock has come down 19% year to date, courtesy of two weak quarters in a row... I think there's more life to this business. But then R.R. Donnelley reported this morning, and low and behold, sure enough, results were better than expected. The company delivered a 7-cent earnings beat off a 35-cent basis, with higher than anticipated revenues that climbed 12% year over year.
That's pretty solid. At the same time, management reaffirmed their full-year guidance. And together with that beat, that sent the stock up 81 cents. Hey, that's nearly 5%. So what's going right here? First of all R.R. Donnelley has a fantastic business putting together financial statements, and they're the single-most-trusted firm in the space. Second, while commercial printing may be in decline, it's also a highly fragmented industry, so the company's been making acquisitions, and they dramatically slashed costs, like buying Consolidated Graphics, another commercial printer, for $700 million in October. Third, R.R. Donnelley does have one big tailwind, outsourcing. Because when you have parts of your business scattered all over the globe, that creates terrific demand for the company's packaging and labeling business. That's a good one, not to mention the logistics, distribution, warehouse and servicing, and e-books. Now, while R.R. Donnelley has had a tough year, the stock has still given you a 40% return, with dividends, since I first got behind it, roughly 13 months ago. And I think that huge dividend is more than secure, easily covered, and the stock deserves to be in the $20s...