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CHICAGO (AFX) - Printing company R.R. Donnelley & Sons Co. said Tuesday its third-quarter profits rose 61 percent, benefiting from higher sales and a lower tax rate.
Earnings exceeded Wall Street's expectations but the company said full-year operating profits will be slightly below analysts' estimates.
The results came six days after Donnelley announced an agreement to buy printing rival Banta Corp. for $1.3 billion.
Net income rose to $164.7 million, or 75 cents per share, from $102.1 million, or 47 cents per share, a year ago. Excluding restructuring charges, the company posted earnings from continuing operations of $146.2 million, or 67 cents per share, in the latest quarter.
On average, analysts surveyed by Thomson Financial were looking for a profit of 66 cents per share.
Sales grew 6 percent to $2.31 billion from $2.18 billion last year, driven by new customers and increased volume with existing customers, favorable foreign exchange comparisons and acquisitions, which were offset in part by continued price pressure.
The company said its effective tax rate decreased to 27.2 percent from 35.2 percent in the third quarter of 2005, due to a gain on a deferred tax asset. However, gross margins slipped to 28.2 percent from 28.4 percent a year ago, reflecting price pressure, business mix shift and higher energy prices that offset higher sales volume and productivity efforts.
"We are pleased with our third-quarter results," said Mark A. Angelson, chief executive officer. "Sales leverage coupled with strong cost control expanded margins in the quarter. Our publishing and retail services segment delivered strong operating margin expansion and solid revenue growth."
In announcing the Banta deal last week, Donnelley said the purchase will expand its product range as well as boost services in magazine, catalog and book printing and in direct marketing. The deal is expected to close in the first quarter.
R.R. Donnelley sees 2006 operating profit of $2.45 to $2.50 per share, trending toward the high end of the range. The guidance includes the expected impact from both the acquisition of OfficeTiger and the inclusion of stock-based compensation costs, and assumes no shares buybacks.
That is below analysts' consensus estimate of $2.52 per share.
The company's shares fell 62 cents, or 1.7 percent, to close at $35.16 on the New York Stock Exchange. Copyright 2006 Associated Press. All rights reserved. This material may not be
Copyright 2006 AFX News Limited. All Rights Reserved.
