On Friday, Rosenblatt initiated coverage on Quad/Graphics (NYSE: NYSE:QUAD) stock, a global leader in the printing industry, with a Buy rating and a price target of $7.50. The firm highlighted the company's strong balance sheet, noting significant improvements since its public offering.
Quad/Graphics' net leverage ratio is projected to decrease to 1.8x in 2024 from 2.0x at the end of December, compared to 2.5x in 2011. Furthermore, the company's net debt has been reduced to under $500 million from over $1.4 billion since 2011.
The analyst pointed out that while the printing industry has faced considerable pressures, Quad/Graphics has managed to navigate the challenges without filing for bankruptcy—a fate that befell many of its peers.
Notably, Quad/Graphics ranks second globally in revenue within the industry and successfully merged with Quebecor/World Color post-bankruptcy on July 6, 2010.
Quad/Graphics has also been recognized for its strategic management of real estate assets. The company closed two facilities, totaling 1.7 million square feet, from 2020 to the third quarter of 2023, resulting in approximately $96 million in cash from property sales.
Following this, Quad/Graphics shuttered an additional two facilities, comprising 1.6 million square feet, at the end of 2023 and on May 4, 2024. Based on previous sales, these closures could potentially generate an estimated $79 million in the near term.
The company's ability to generate significant cash from property sales while reducing debt and maintaining a robust balance sheet amidst industry challenges underpins the positive outlook from Rosenblatt. The Buy rating and $7.50 price target reflect the firm's confidence in Quad/Graphics' financial strategy and asset management.
InvestingPro Insights
As Quad/Graphics (NYSE: QUAD) garners a positive outlook from industry analysts, real-time data from InvestingPro further enriches the investment narrative. The company's market capitalization currently stands at $238.92 million, underscoring its presence in the printing industry despite a challenging market environment. While the P/E ratio indicates that the company is not currently profitable, with a trailing figure of -91.19, this is not uncommon in industries undergoing transformation. Moreover, the InvestingPro Tips suggest that management's aggressive share buyback strategy and the expectation of net income growth this year could signal a turnaround for Quad/Graphics.
InvestingPro Tips also highlight a strong free cash flow yield valuation for the company. This could be particularly attractive to investors looking for companies with the potential to generate cash while navigating through industry headwinds. Additionally, the price of Quad/Graphics has shown volatility, with a significant drop over the last three months. Yet, analysts predict profitability this year, which may offer a silver lining for prospective investors. With these insights, those interested in Quad/Graphics can delve deeper into the company's financial health and future prospects by exploring more tips on InvestingPro, including additional analysis and metrics. For access to these resources, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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