Essendant Shares Plunged to 52-Week Low; But the Dividends Are Safe

    Author Siraj SarwarPosted on Categories Industrial Products, IndustrialsTags , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,
    Essendant

    Essendant (NASDAQ:ESND) shares plunged to a 52-week low of $7.38 today following the decline of 31% in the last four months. Essendant is a wholesale distributor of workplace items and it has divided products into different categories. The selloff in ESND share price was supported by lower than expected results in the past two quarters.

    The company’s revenue fell 4.5% in the fourth quarter compared to the past year period. The company blamed restructuring actions for lower revenues in the fourth quarter. Its revenue from five of seven business segments fell over the year-ago period.

    Below are the fourth quarter category revenue compared to year-ago period:

    • JanSan Products:  down 9.4% to $304.0 million
    • Technology Products:  dipped 8.5% to $285.0 million
    • Traditional Office Products:  decreased 4.8% to $175.4 million
    • Industrial Supplies:  up 11.0% to $154.1 million
    • Cut-sheet Paper Products:  plunged 3.3% to $98.2 million
    • Automotive:  rose 12.1%, to $87.4 million
    • Office Furniture:  decreased 16.4% to $56.2 million

    The CEO said: “We have seen growth in our key JanSan reseller channel and the Industrial reseller channel, though overall sales continued to be significantly pressured by changes in the sourcing strategies of the national resellers, as reflected in our product category sales results.  We also have advanced our inbound freight consolidation consistent with our plans.”

    Lower revenues have impacted its earnings potential and cash generation potential. ESND posted the GAAP loss per share of $0.04 in Q4 FY2017, compared to a loss of $0.06 per share in the fourth quarter 2016.

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    Its Dividends Are Safe

    Although the company expects its revenue and earnings to remain depressed in the first quarter amid the restructuring actions, its full-year free cash flows are liable to cover the dividend payments and capital investments. Its free cash flows are likely to stand in the range of $40million when its dividend payments are expected to stand around $20million. The company currently offers a dividend of $0.14 per share, yielding around 6%.

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    Author Siraj Sarwar
    About the author: Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.