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American Greetings (AM) is coming off a
large negative earnings surprise and is a Zacks #5 Rank (Strong
American Greetings designs, manufactures and sells greeting cards and other social expression products in the United States and internationally. The company provides greeting cards, gift packaging products, party goods, stationery, giftware, and custom display fixtures. The company distributes its products through mass merchandisers, chain drug stores, supermarkets, card and gift shops, department stores, military post exchanges, variety stores, and combo stores, as well as through its Website Cardstore.com. American Greetings was founded in 1906 and is headquartered in Cleveland, Ohio.
American Greetings Big Miss
The most recent quarter saw the company miss the Zacks Consensus Estimate by a large amount. The company reported a loss of $0.05 per share while the consensus estimate was calling for a gain of $0.48. That translates to a $0.53 miss or 110%. The stock fell 2% in the session following the release.
Stock Sees Institutional Selling
Marathon Asset Management recently sold 1.4M shares of AM. The asset manager still holds 1.3M shares and is now below the 5% 13G filing requirement at 4.6% ownership. This type of institutional selling does not bode well for the company despite the fact that its management is looking at an LBO.
American Greetings Sees Estimates Moving Lower
Estimates for American Greetings have been sinking of late. The Zacks
Consensus Estimate for 2013 for AM stood at $2.10 as of
February 2012. The consensus has since moved lower to $0.80. Over
the same time period estimates for 2014 have moved from $2.93 to
$2.35. The implied earnings growth rate is negative, and not what an investor wants to see.
The valuation metrics for AM are low, but don't think there is a lot of value in this stock. The trailing PE of 8x is less than half the 17x industry average, while the forward PE of 20x has the company trading at a premium to the industry average of 15x. Price to book of 0.8x is well below the 4x industry average and price to sale is also quite low at 0.3x compared to 1.3x industry average.
The stock has been stuck around the $17 level due to a September 2012 announcement that management was looking to buy the company. Only recently have investors started to sell the stock in the face of a rising market with AM seeing significant competition and lower earnings. The stock is a Zacks Rank #5 (Strong Sell)
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