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Can R.R. Donnelley Recover in 2013?

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As 2013 begins, now's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.

Today, I'll look at R.R. Donnelley (Nasdaq: RRD  ) . The business services company had a nightmare experience in 2012 as a major mistake earned it unwanted notoriety, but the bigger threat to the business comes from generally poor conditions throughout its industry. Below, you'll learn more about R.R. Donnelley's prospects for 2013.

Stats on R.R. Donnelley



Average Stock Target Price


Full-Year 2012 EPS Estimate


Full-Year 2013 EPS Estimate


Full-Year 2012 Sales Growth Estimate


Full-Year 2013 Sales Growth Estimate


Forward P/E


Source: Yahoo Finance.

Will R.R. Donnelley turn things around?
Analysts appear to see R.R. Donnelley as more of a value play than a turnaround candidate. From a fundamental perspective, they don't see sales rebounding and expect continued pullbacks in earnings per share as well. Yet with a very low forward valuation, the stock could rise more than 40% if it approaches analysts' target price.

The big reason that R.R. Donnelley attracts so much investor attention is its huge dividend yield. With a yield topping 11%, the publishing company is among the top five yielding stocks in the S&P 500. Unfortunately, like postage-meter specialist Pitney Bowes (NYSE: PBI  ) and rural telecom giants Frontier Communications (Nasdaq: FTR  ) and Windstream (Nasdaq: WIN  ) , R.R. Donnelley has investors wondering if its services business can avoid becoming obsolete. Just as mail has given way to electronic communication and landlines have ceded ground to wireless telephony, Donnelley's traditional printing business looks increasingly outdated as online publishing picks up steam.

Donnelley is doing its best to adapt to changing conditions. Its purchase of Edgar Online last year was a recognition that the company needs to evolve to the digital age. But with COO John Paloian stepping down from his management role as of Dec. 31, Donnelley will need to reorganize its internal structure to meet the challenge more squarely.

For Donnelley to have a better 2013, it will need to find a way to reinvigorate its catalog, magazine, and other print businesses while finding ways to boost its online presence. Without success in those areas, even an 11% dividend won't be enough to make shareholders happy.

Click here to add R.R. Donnelley to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

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