San Francisco, California-based Core-Mark Holding Company, Inc. (CORE) recently posted first quarter 2011 adjusted earnings of 13 cents, beating the Zacks Consensus Estimate of 10 cents as well the year-ago performance of 12 cents. The better-than-expected results were due to an upside in margin.
The company, which distributes packaged consumer products to the retail industry, reported net sales of $1.72 billion, up 8.9% from the prior-year quarter. The upside in revenue was attributable to an increase in volume, higher sales resulting from the acquisition of Finkle Distributors, Inc. during the third quarter of 2010, inflation in excise taxes and an extra selling day.
During the quarter, adjusted gross profit expanded 6.4% to $93.5 million, as total operating expense dipped 8 basis points (bps) to 5.3%, despite higher fuel expenses and cost related to the acquisition of Forrest City Grocery Company. Thus, the company continues to benefit from its cost control measures.
Financial Position
At the end of the quarter, the company had cash and cash equivalent of $41.2 million, long-term debt of $0.7 million and shareholder’s equity of $367.0 million.
Outlook
For fiscal 2011, the company reaffirmed its net sales guidance of $8.0 billion and expects capital expenditure to be $24 million.
Our Take
The company has reported a growth in sales and continues to make efforts to enhance margins. Moreover, Core-Mark is experiencing product inflation, which is expected to boost results in the next several quarters. Hence, estimates are expected to increase in the coming days. The Zacks Consensus Estimate is currently pegged at $2.53 for 2011 and $2.96 for 2012.
Core-Mark currently has a Zacks #3 Rank, which implies a Hold rating over the short term. We also reiterate our long-term Neutral recommendation on the stock.
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