Stock market picks: Transcontinental earnings rise sharply

Transcontinental Inc. (symbol TCL.A on Toronto) is the largest commercial printer in Canada and Mexico, and the fourth-largest in North America. This business provides 65% of its revenue and earnings. The company also publishes newspapers and magazines (30% of revenue and earnings). The remaining 5% comes from its marketing-communications division, which designs advertising campaigns, including direct mail, and analyzes customer-purchasing data. Transcontinental is one of the stock market picks we analyze in our Successful Investor newsletter. Transcontinental also has over 150 web sites. Business from the Internet accounts for just 1% of the company’s overall revenue. Still, these web sites will become more important to Transcontinental’s growth in the next few years, as advertisers spend more on the Internet than print products. Excluding unusual items, Transcontinental earned $62.9 million, or $0.77 a share, in its fourth quarter, which ended October 31, 2010. That’s up 20% from $52.4 million, or $0.65 a share, a year earlier. This is the sixth consecutive quarter that Transcontinental has reported higher year-over-year earnings (excluding unusual items). In the latest quarter, Transcontinental’s revenue was $570 million, unchanged from a year earlier. If you exclude the impact of acquisitions and businesses it sold, revenue would have increased by 1.3%. On a full-year basis, earnings grew 18.7% to $158.5 million, or $1.96 a share, from $133.5 million, or $1.65 a share, in 2009. Revenue declined 3.6%, to $2.1 billion from $2.2 billion, mainly due to sales or closures of plants and publications, the negative impact of exchange rates and rising paper costs. Transcontinental also raised its quarterly dividend by 22.2%. The new annual rate of $0.44 yields 2.8%. You can get our in-depth analysis, including our latest buy/sell/hold advice, on Transcontinental and dozens of other stock market picks when you subscribe to The Successful Investor. What’s more, you can get one month free when you subscribe now. Click here to learn how.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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