A leading printing and integrated communications provider, R.R. Donnelley & Sons Co. (RRD) entered into a multi-year agreement with leading branded merchandise company Hanover Direct Inc. The deal renews RRD’s long term partnership with the company. Terms of the deal were not disclosed.
As per the agreement, R.R. Donnelley will offer premedia, print production and logistics services for Hanover Direct’s Catalogs.
Hanover uses its portfolio of catalogs and e-commerce services to sell branded merchandise to customers. Promotions form an integral part of Hanover’s marketing strategy. To achieve its promotional goals, Hanover needs to follow an efficient and timely communication process with its customers.
R.R. Donnelley believes that it is capable of providing such an integrated service that will boost Hanover’s promotional capabilities, thereby broadening the company’s customer base in the long term.
On a separate note, R.R. Donnelley was recently selected by The Leading Hotels of the World Ltd to produce its 2011 directory. The Leading Hotels of the World Ltd is one of the largest international luxury hotel brands that has footprint in 22 major markets worldwide.
R.R. Donnelley is the premier printing company in the U.S., offering a diverse array of printing services. The company is a global provider of integrated communications and a dominant player in the commercial printing industry.
However, R.R. Donnelley faces stiff competition from Dai Nippon Printing Co. Ltd., Accenture plc. (ACN) and privately held Toppan Printing Co. Ltd.
R.R. Donnelley reported non-GAAP net income of $69.5 million or 33 cents per share in the first quarter of 2010, driven by lower operating expenses. This was above the reported net income of $49.2 million or 24 cents per share in the first quarter of 2009 and the Zacks Consensus Estimate of 30 cents.
R.R. Donnelley was able to maintain its market share due to its strong global manufacturing and service platforms and its strong relationship with blue-chip customers such as AT&T Inc. (T). The company also provides printing services to AT&T’s Advertising Solutions.
We maintain a Neutral recommendation on the company on a long-term basis. We believe R.R. Donnelley will benefit from stabilizing demand and positive revenue outlook. Moreover, strict cost control, strong cash flow and new customer wins will drive earnings growth going forward.
However, pricing continues to remain under pressure, and an increase in raw material cost and decline in volumes may affect profitability going forward.
R.R. Donnelley has a Zacks Rank #4, which implies a short-term Sell rating.
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