American Greetings Corp (AM) handily beat Wall Street’s expectations last week. The company posted a sizable profit after reporting a steep loss one year ago.
Company Description
American Greetings Corp makes greeting cards, wrapping paper and party goods under several brands. Some of the names included American Greetings, Carlton Cards and several others.
Well Ahead of Expectations
On Apr 22 American Greetings reported quarterly revenue of $426 million, up slightly from one year ago. However, earnings per share dramatically improved, coming in at 69 cents compared to a loss in 2009.
The Zacks Consensus Estimate heading into the report was only 27 cents, making this a 140% surprise.
Estimates Surge
Following the report the American Greetings analysts raised full-year estimates. The forecast for this year is up 48 cents, to $2.81.
Next year’s projection is up 47 cents to $3.10. If American Greetings can hit these levels, year-over-year growth would be 11% and 10%, respectively.
Even with earnings momentum and solid growth projections, shares of AM are still trading at a good value. The forward P/E is in the single digits and the PEG ratio is coming in at 0.9.
The company’s price-to-book ratio is about 1.6 times, which is well ahead of the 2.3 that its peers are averaging.
Lean and Mean
Over the past few quarters we have seen the cost-cutting measures for retailers, as well as other industries, really start to pay off and American Greetings is no exception.
Despite a marginal improvement in revenue the company’s earnings picture was a stark contrast to the previous year. By eliminating overhead costs and focusing on core competencies, more of the revenue is trickling all the way down to the bottom line.
The Chart
The earnings report couldn’t have come at a better time. Shares were starting to lose momentum, but the better-than-expected numbers drove the stock to a new 52-week high.
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