Deluxe Earns 78 Cents Per Share

The earnings parade continues! Deluxe ($DLX) just reported Q3 earnings of 78 cents per share which was three cents more than estimates. Revenue came in at $355.1 million which was just shy of consensus.

Deluxe is one of our quieter stocks but it’s still doing well. I really like the stock’s high dividend yield. For Q4, Deluxe sees earnings ranging between 77 cents and 84 cents per share on revenue between $359 million and $369 million. Wall Street had been expecting 82 cents per share on revenue of $362.84 million so there’s no surprise here.

The stock initially dropped this morning which is an odd reaction to today’s report, but the shares have since rallied. At the current price, DLX yields 4.13%. I probably won’t have Deluxe on next year’s Buy List but I think the shares are a good buy at this price.

Here are some details on the recent quarter:

“Deluxe delivered another solid quarter despite the ongoing sluggish economy,” said Lee Schram, CEO of Deluxe. “Excluding the impact of last year’s $25 million contract settlement and the recent PsPrint acquisition we grew revenue and delivered on our cost reduction initiatives. We also delivered strong operating cash flow and repurchased additional shares. With three quarters complete, we are confident in our ability to deliver the full year revenue and EPS objectives established in January despite added challenges from the economy.”

Third Quarter 2011 Highlights:

* Revenue for the quarter was $355.1 million compared to $367.6 million during the third quarter of 2010. Revenue in 2010 included a contract settlement of $24.6 million. Excluding the contract settlement, revenue increased 3.5% compared to 2010, with growth in Small Business Services more than offsetting declines in the personal check businesses.

* Gross margin was 65.5 percent of revenue compared to 67.0 percent in 2010. The contract settlement in 2010 had a favorable impact of 2.4 percentage points on 2010 gross margin. Favorable impacts from price increases and the Company’s continued cost reduction initiatives more than offset increased material costs and delivery rates in 2011.

* Selling, general and administrative (SG&A) expense increased $5.0 million in the quarter compared to 2010. Increased SG&A expense associated with acquisitions and investments in revenue generating initiatives was partially offset by benefits from continued execution against cost reduction initiatives.

* Operating income in 2011 was $65.6 million compared to $88.5 million in the third quarter of 2010. The decrease was driven primarily by the $24.6 million contract settlement in 2010. Restructuring and transaction-related costs were $5.1 million in 2011 versus $0.1 million in 2010. The 2011 costs were primarily attributable to the Company’s on-going cost reduction initiatives and the July acquisition of PsPrint. Operating income was 18.5 percent of revenue compared to 24.1 percent in the prior year driven primarily by the 2010 contract settlement.

* Reported diluted EPS decreased $0.27 from the prior year driven by the 2010 contract settlement of $0.31 per share, offset by improved operating performance and a lower effective tax rate primarily from actions taken to restore a portion of the deferred tax asset related to Medicare Part D subsidies.

Posted by on October 27th, 2011 at 11:57 am

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