Essendant, which was previously known as United Stationers, is based out of Deerfield, Illinois. During the past few years, the company has been going through an overhaul. Since the beginning of the year, ESND stock has taken a tumble and hasn’t looked back. In fact, shares have fallen more than 35% since the beginning of the year. After markets closed on Wednesday, the stock was sent even lower. Despite posting a gross profit of $177.6 million, Essendant’s sales have continued to deteriorate. The earnings missed on revenue and EPS estimates.
Q2 EPS missed by $0.09 while revenue missed by $50 million. The numbers seemed to be a mixed bag and interim president and chief executive officer, Ric Phillips, seems to agree with that assessment. “We made good progress advancing our merchandising and pricing initiatives, and our industrial products category delivered growth for the second quarter in a row. However, this was offset by top line pressure that is reflective of persistent industry challenges.” Phillips insists the company will continue to advance their transformation initiatives during the second half of the years.
Compared to the second quarter of the previous years, net sales decreased by 6.9%. The decline was largely attributed to reduced sales in several key markets, including technology, traditional office products, and JanSan categories. Sales picked up in cut-sheet paper and industrial products. These improvements helped to offset the losses to some degree. Sales figures for each category are as follows.
- JanSan Products – Revenues of $339.40 million for a 8.6% decline
- Technology Products – Revenues of $300.20 million for a 12.4% decline
- Traditional Office Products – Revenues of $181.30 million for a 10.5% decline
- Industrial Products – Revenues of $145.60 million for a 1.7% increase
- Cut-sheet Paper – Revenues of $106.30 for a 4.7% increase
- Automotive Products – Revenues of $82.10 million for a 2% increase
- Office Furniture – Revenues of $67.90 million for a 9% decline
Gross profits equate to $177.6 million for a total decline of $18.3 million from the previous year’s quarter. Essendant managed to decrease operational expenses from $169.40 million last year to $161.70 million this year. Lower pretax income helped the company save more than $3 million in income tax expenses. Last year’s quarter saw a $7.8 million income tax. This year, Essendant paid $4.5 million in taxes during the second quarter.
GAAP diluted earnings of $0.14 per share were recorded. Last year, the company generated GAAP diluted EPS of $0.35. Free cash flow for the quarter came in at $67.4 million. Simultaneously, the company was able to use free cash flow from lower inventories to drive a reduction of long-term debt of $60.5 million during the 2nd quarter.
With the new numbers, Essendant now believes 2017’s full year sales will decline anywhere from 6 to 9% from the previous year. Essendant expects free cash flow generation to be in excess of $90 million for the full year of 2017. Essendant has scheduled a conference call for Thursday, July the 27th of 2017. The call will be available at 7:30 AM CST. Additional details regarding Essendant’s 2nd quarter earnings can be found here.
Since the release of the Q2 earnings report, Essendant stock has dropped more than 12% in after hours trading. ESND stock experienced after hours volume of 11,805 and dropped as low as $11.05 at one point. Now, the stock sits a $11.75.