Quad/Graphics Dropped: 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: If misery loves company, maybe shareholders of Quad/Graphics (NAS: QUAD) should feel relieved. On one hand, they lost 26% of the value of their investment today. On the other hand, at least they made it onto the NYSE's list of stocks posting the largest percentage losses for Wednesday.

So what: This commercial printer reported earnings last night, and while management insists that "both net sales of $1,070.5 million and Adjusted EBITDA of $126.7 million met our financial plan for the quarter," it seems Wall Street was hoping for better. Quad lost $0.22 per share in Q2 -- versus consensus expectations for a $0.32 profit.

Now what: Looking forward, Quad management seems most focused on paying down its sizeable debt load. It promises to use "strong cash flow" to accomplish this, but here's the thing: Over the past 12 months, $168 million of Quad's cashflow was detailed to paying capital expenditures, leaving just $27 million available free for paying down debt. At this rate, paying off Quad's $1.6 billion debt load is going to be a 60-year task. I'm not sure investors are going to hang around that long waiting to see whether it succeeds.

In fact, I'm not sure many of Quad's investors will even still be alive six decades from now.

Have a really long investing timespan?Add Quad/Graphics to your Fool Watchlist. Send us a postcard in 2071, and tell us how it all worked out.

At the time thisarticle was published Fool contributorRich Smithdoes not own (or short) shares of any stock named above. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has adisclosure policy.

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