San Francisco, California-based Core-Mark Holding Company, Inc. (CORE) recently posted fourth quarter 2010 adjusted earnings of 50 cents, which was lower than both the Zacks Consensus Estimate of 56 cents and the year-ago performance of 53 cents. The lower-than-expected results were due to margin contraction.
Core-Mark, a distributor of packaged consumer products to the retail industry, reported net sales of $1.65 million, up 12.4% from the prior-year quarter. The upside in revenue was due to an increase in volume and higher sales resulting from the acquisition of Finkle Distributors, Inc. during the third quarter of 2010.
The company’s full-year adjusted earnings per share were $2.38, versus $2.64 in fiscal 2009. Revenues were $7.27 billion in full fiscal 2010, up 11.3% year over year.
During the quarter, gross margin plunged 60 basis points (bps) to 5.1%, due to a spike in cost of goods sold that was driven by higher fuel expenses. However, the company is taking cost control measures, resulting in a drop in operating expense (down 10 bps).
Financial Position
At the end of 2010, the company had cash and cash equivalent of $16.1 million, long-term debt of $0.8 million and shareholder’s equity of $362.7 million.
Outlook
For fiscal 2011, the company reaffirmed its sales guidance of $7.7 billion and expects capital expenditure to be $24 million.
Our Take
The company reported double-digit growth in sales and continues to make efforts to enhance margins. However, estimates have not budged in the last 7 days, implying absence of catalyst in the near term. The Zacks Consensus Estimate is currently pegged at $2.78 for 2011 and $3.14 for 2012.
Core-Mark currently has a Zacks #4 Rank, which implies a Sell rating over the short term. We also reiterate our long-term Neutral recommendation on the stock.
CORE-MARK HLDG (CORE): Free Stock Analysis Report
Zacks Investment Research
