VistaPrint Wins Again in Reporting versus RRD and Quad

Neither Quad nor RR Donnelley did much to convince equity markets that good times are returning soon. Only Consolidated Graphics seemed to have a good first quarter on “same store sales” as the smaller printer market did much better throughout 2010 and early 2011 than big print. VistaPrint just continues to shine.

RRD is shopping $500 Million of debt to repurchase shares trading at $20 rather than invest in new markets or grow share through acquisition. While it first quarter demonstrated no growth domestically in much of its business model, it would be interesting to understand why management feels its enterprise value may improve to $30 per share and this buyback is a good use of debt to purchase cheap equity!

While the only bright spot remains internationally in Latin America and Asia, if the stock trades at $15 come December 31, this will look rather silly. Betting share price will move to $25-$30 when there has been no real good news in any of its domestic end markets is a risky bet.

Meanwhile, Quad continues to relocate its customers off the old World Color “tired iron” to the better asset base of all the existing Quad plants. If one were to recall, in 2005 QuebecorWorld was about a $6 billion company with a plan to upgrade facilities by investing in $1 billion of new equipment. Quad was private and posted revenues near $2 billion at that time. Annualized, both companies were close to RR Donnelley’s $8 billion. Quad’s first quarter 2011 was about $1 billion (maybe close to $5 billion if we annualize) and RRD has been stuck on $10 billion annualized for the past 3 years even with all its acquisitions. Both companies just keep marching in place as content shifts.

As print content continues to loose share, the only real revenue growth for RRD & Quad is internationally and through acquisition. Their base business will continue to shrink as e-content and print share the reader’s habits. While well managed, both companies need the VistaPrint model to engage equity investors. Each one has tried to add services to capture more of their clients supply chain, only VistaPrint has really succeeded.