Quad/Graphics Shares Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of print specialist Quad/Graphics (Nasdaq: QUAD  ) were bleeding all over today, falling by as much as 25% in intraday trading after the company reported third-quarter results.

So what: For the third quarter, Quad/Graphics reported total revenue of $1.19 billion, down 2% from last year, but basically in line with expectations. Adjusted earnings per share were up significantly from last year, but the $0.80 tally was $0.06 short of what Wall Street was looking for. Mr. Market doesn't typically give A's for effort during earnings season, and that performance isn't winning Quad/Graphics many fans today.

Management pointed to a slowdown in volume that started at the end of the second quarter as the reason for the softer-than-expected financial performance in the most recent three months.

Now what: Of course, investors tend to be less concerned with "what have you done for me lately" and more concerned with "what will you do for me tomorrow." And on that note, Quad/Graphics also delivered downer news, forecasting that the softness in the third quarter would continue in the fourth quarter. As a result, the company decided to lower its full-year profit expectations.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 12, 2011, at 1:26 PM, BrianInColorado wrote:

    Quad is a true blend of a well-run, focused printer (Quad Graphics) and the former World Color/Quebecor, a hodge-podge of printing plants and lines of business built through mergers.

    Quad's revenue decline reflects the continuation of the long-term decline in demand for commercial printing. Unlike RRD, Quad's quarterly numbers are not hyped by acquisitions.

    Quad and RRD will pound on each other for the foreseeable future, cutting prices and shedding assets as print markets stagnate/decline. Write-offs, always described as "one time", will become the norm.

    Few if any attractive acquisition targets remain in the US for either firm. The major remaining commercial printers are mainly cold-set web offset printers of low-end, low-margin newspaper circulars and the like. And newspapers themselves now have the technology to print four-color cold-set.

    Neither company has shown any interest in getting into printing packaging...a market that will not be displaced by the internet, and which shares a common technology and business process with commercial printing. I suspect that it is a low-margin business that does not support six figure sales reps and which does not leverage existing relationships in the publishing world of books, catalogs, magazines, directories, retailers (newspaper inserts) and direct marketers (banks, etc.)

    Oh, and did I mention that the primary distribution channel for both companies, the USPS, is heading for a major restructuring?

  • Report this Comment On November 13, 2011, at 7:49 PM, snoopdogDaRock wrote:

    I will try and be respectful here but working for a company that a lot of times i see managers and leads be disrespectful to the workers it will be hard. Quad is getting what it has set itself up for. Down here we have become numbers instead of people. What got Quad to be a great printing company was Harry Quad. He was an innovator from what I see Joel is not and has made this company top heavy like an upside down pyramid. I have never seen a company with so many managers. The 6's program is suppose to be where the employees have an input but down here at The Rock Georgia it is a Do as I say and not as I do type management. Sure we have a few managers that aren't this way but a lot of them are. As I see it Joel has lost contact with the backbone of the company and listens to the mountains of management teams he has. Quad needed another Harry.

  • Report this Comment On November 15, 2011, at 9:45 AM, HavaBrain wrote:

    Think Kodak.

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