RRD Gets Print Management Contract - Analyst Blog
06 August 2011 - 1:30AM
Zacks
R.R. Donnelley & Sons Company (RRD) won a
multi-year print management contract from Herbalife, a nutrition
and weight management company.
According to the contract, the company would produce and manage
Herbalife’s wide range of products, including catalogs, magazines,
commercial and digital printing, forms, labels and event marketing
materials. For this purpose, R.R. Donnelley will be providing an
onsite team as well as its Print Management system, which is
expected to cut down on Herbalife’s current outflows.
The print management system reduces printing costs through
consolidating, standardizing and converting to the print- and
fulfillment-on-demand model, thus improving operational
efficiencies, as well as the return on investments (ROI).
The agreement with Herbalife will likely boost R.R. Donnelley’s
international sales and related services platform. R.R. Donnelley
has recently announced its second quarter 2011 results, where
international sales increased 17.2% year over year and accounted
for 26.8% of the total sales. The year-over-year growth was driven
by increased sales related to the acquisition of Bowne.
Moreover, U.S. Print and Related Services revenue (73.2% of
total sales) increased 6.2% year over year to $1.92 billion. The
increase was primarily due to the acquisition of Bowne and volume
increases in commercial, logistics and financial print, partially
offset by volume declines in books and directories and continued
pricing pressure across the segment.
R.R. Donnelley is witnessing stabilization in demand, increase
in volumes and new customer wins. We believe that strong alliances
and customer wins including AT&T Inc. (T) and
Verizon Communications Inc. (VZ) will create value
for the company over the long term. We also remain positive about
the Journalism Online LLC acquisition.
However, higher pension expenses, continuing pricing pressure
and a highly leveraged balance sheet are expected to create
significant headwinds going forward.
We maintain our Neutral rating on a long-term basis (6-12
months). Currently, R.R. Donnelley has a Zacks #3 Rank, which
implies a Hold rating on a short-term basis (1-3 months).
DONNELLEY (RR) (RRD): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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