Quad/Graphics Inc. (NYSE:QUAD) shares rallied to a nine-month high of $27.50 after topping revenue estimates for the fourth quarter. The company’s earnings and free cash flows also increased at a robust rate, with improved margins and operational efficiencies.
Trading around $27 a share, QUAD stock stands at the highest level in the last nine months, shares are just shy of the 52-week high of $29.
Revenue Beat and Earnings Growth Lift Quad/Graphics Stock
Though the company’s revenue declined 3% year over year in the fourth quarter, its revenue of $1.16 billion has beaten analysts’ consensus estimate by $20 million. The revenue of $4.1 billion in FY2017 declined when compared to the revenue of $4.33 billion in 2016.
The company expects better revenue in 2018 on the back of Ivie acquisition, a leading marketing services provider – which will help in enhancing Quad 3.0 transformation.
Quad/Graphics impressed investors with its operational performance and cost cuttings.
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The company’s net earnings of $55 million in Q4 rose 47% from the past year period, while earnings grew 139% to $107 million for the year.
“We are pleased with our fourth quarter and full-year 2017 results, which were in-line with our expectations and demonstrate continued execution of our strategic priorities to generate consistent earnings and strong, sustainable Free Cash Flow that further strengthen our balance sheet,” said Joel Quadracci, Quad/Graphics Chairman, President & Chief Executive Officer.
Higher Free Cash Flows Support Dividends and Investment Potential
Higher earnings raised Quad/Graphics’ cash generation potential. It generated operating cash flow of $344 million in 2017, compared to capital requirements of $86 million. Thus, QUAD was left with free cash flows of $258 million – which is sufficient to cover the dividend payments of $62 million. The company also appears in a strong cash position to support its Quad 3.0 transformation. Quad/Graphics expects to generate free cash flows in the range of $240 million next year, which would be enough to support dividends and investment potential.
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