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Bear of the Day: Core-Mark Holding (CORE)

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Core-Mark Holding (CORE - Free Report) , a Zacks Rank #5 (Strong Sell), .is one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry in North America. Core-Mark Holding Company, Inc.is one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry in North America. Core-Mark offers a full range of products, marketing programs, and technology solutions. Core-Mark services traditional convenience retailers, grocers, drug, liquor and specialty stores, and other stores that carry convenience products.

Recent Earnings Data

The company reported Q3 earnings data in early November where they missed the Zacks consensus earnings estimate for the fifth consecutive quarter, but beat on the top line.  The earnings data was mostly positive where they saw year over year gains in Net sales +7.9%, Non-cigarette sales +18.8%, cigarette sales +3.6%, Candy sales +50%, and Food category +15.4%.  The company also saw gross profits improve by +11.7%, and operating expenses fell by 11.4%.  

But on January 5th, the company preannounced Q4 earnings data, and lowered expectations for FY 18.  Management stated that fourth quarter EBITDA would be $41 million, down from the $56 million expected in November.  The decline is attributed to cigarette carton sale slow down, cost overruns, and weak retail sales.  Another factor in the decreased guidance was the loss of both Kroger, and Circle K customers (a loss of about 1,700 stores).  To make matters worse, management also lowered FY 18 EBITDA guidance below the consensus estimate of $176 million to $162 million, a $14 million decline.  This decreased guidance could become worse as the company is factoring in both the retail and cigarette segments to move back to a breakeven point.  So this guidance could be viewed as high, with a potential of falling even further during the year.

Price and Earnings Consensus Graph

As you can see in the graph below, the stock price has been steadily falling since the latter half of 2016, and this recent announcement made it dip even further.

Core-Mark Holding Company, Inc. Price and Consensus

Core-Mark Holding Company, Inc. Price and Consensus | Core-Mark Holding Company, Inc. Quote

Declining Earnings Estimates

Given the decreased guidance, analysts have decreased its estimates for Q4 17, Q1 18, FY 17 and FY 18 over the past 30 days; Q4 17 dropped from $0.48 to $0.28, Q1 18 fell from $0.09 to $0.03, FY 17 was cut from $1.19 to $1.05, and FY 18 was trimmed from $1.44 to $1.27.

If you are inclined to invest in the Business Services segment, you would be best served by looking into Crawford & Co (CRD.B - Free Report) , Interserve PLC (ISVJY - Free Report) , and or Vectus Inc. (VEC - Free Report) , all of whom currently carry a Zacks Rank # 1 (Strong Buy) rating.

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