Sunday, July 25, 2010

Estimates for ARC (NYSE: ARP) for Q2 2010

Okay, ARC will soon be releasing its Q2 2010 “actual” numbers (Revenues and EPS), and I know everyone is waiting, waiting, waiting ….. and anxious to see ARC’s results! (ARC will be releasing its numbers after market close on August 3rd.)

I just checked on, and the current Equity Rating for ARC (NYSE: ARP) is “Outperform” (in other words, a “buy” recommendation.) (That Equity Rating was as of July 16, 2010.)

ARC released its Q1 2010 numbers on May 4, 2010. On April 26, eight days before the Q1 2010 press release, ARC’s shares closed at $10.87.

Since then, the lowest price ARC’s shares have closed at was $8.12*, which was the closing price on July 15th. However, ARC’s shares have had an impressive surge the past 10 days; ARC shares closed at $9.13 on July 23rd.

Okay, so we are now about 8 days before ARC issues its Q2 2010 earnings release, and, as I just said, ARC’s shares closed at $9.13 on Friday.

I’m going to give you a “roundup” of the revenue and earnings estimates I’ve seen for ARC for Q2 2010. But, first, I’m going to make a few comments:

For Q1 2010, one analyst, Brad Safalow of PAA Research, LLC ( was “right on the mark” with his estimates of ARC’s Q1 2010 Sales and Earnings Per Share. While I would say that “his crystal ball must be working properly”, I am a subscriber to PAA, and, having read all of the reports PAA has issued about ARC, ever since PAA began following ARC, I am well aware that Mr. Safalow does an extensive amount of research about ARC and the Reprographics Industry (and the AEC Industry that most of ARC’s revenues are generated from), enough to know that “crystal ball” does not apply to Mr. Safalow. Quite frankly, I’ve read analyst research reports from other investment research companies – and I’m referring to very large companies – and I’ve yet to find another investment research company that has “as good a grip” as Mr. Safalow has on ARC and the Reprographics Industry. The depth of his research and analysis is very impressive!

Most reprographers are aware that (at least) two different companies – Robert W. Baird & Co and PAA Research, LLC - are periodically conducting “surveys” on the AEC Reprographics Industry. Apparently, Baird’s survey is limited to reprographers who are members of the IRGA. It is my understanding that PAA Research’s survey is not limited to IRGA members. Without question, those surveys are being conducted so that these two firms, who both report on ARC and who from time to time issue recommendations about ARC stock, can make informed estimates and comments.

Okay, now I’ll give you a roundup of the revenue and earnings estimates I’ve found for ARC for Q2 2010. Please note that I did my research for this post today, July 25th, and analysts frequently revise and update their estimates, so this roundup is “as of today.”

Prior numbers, for reference purposes:

Revenue Q2 2009 (same quarter, last year): $131.05 (million)
EPS Q2 2009: $.14

Revenue Q1 2010 (previous quarter, this year): $112.2 (million)
EPS Q1 2010: $.02


On Finance:
Number of analysts: 3
High estimate: $117.45 (million)
Low estimate: $113.83 (million)
Average estimate: $115.76 (million)

On (as per article of April 8, 2010)
Estimate: $118.5 (million)


Number of estimates: 2
High Estimate: $.09
Low Estimate: $.04
Mean Estimate: $.07

Number of estimates: 4
High Estimate: $.06
Low Estimate: $.04
Mean Estimate: $.05

On Finance:
Number of estimates: 3
High Estimate: $.06
Low Estimate: $.04
Average Estimate: $.05

On (as per article of April 8, 2010)
Estimate: $.10
(Note: I am not aware that PAA has updated its estimate since April 8)

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Joel’s further comments:

As I’ve pointed out in previous posts, I have a crystal ball, somewhere, but it does not work. And, as I’ve also previously pointed out, I did not graduate from Stanford, Harvard, Wharton or Columbia. In addition, I’ve never worked for a finance or investment company, nor for a mutual fund or a hedge fund. (The only hedge I’m very knowledgeable about it is the one in front of my house.)

But, putting all that aside, I’m now going to take a SWAG “stab” at ARC’s Q2 2010 numbers. (Definitely, SWAG method.)

Things my SWAG estimates consider:

1) Traditionally, the 2nd Quarter of each year is the strongest quarter of the year for reprographers. Even though ARC’s Q2 2009 revenues were less than its Q1 2009 revenues (and that was not normal, that was an anomaly), I’m guessing that there has been at least some “stabilization” this year in the reprographics market and that ARC’s Q2 2010 sales will exceed its Q1 2010 sales. (And, if we see that that happened, that will at least be refreshing, because it may mean a return to “normal” seasonality.)

2) By now, most of the Fed stimulus money is in the AEC marketplace, not sitting on the sidelines waiting to be committed. ARC should benefit at least somewhat because of that.

3) ARC indicated in past Press Releases that it was going to be pushing hard into the “non” AEC reprographics marketplace. ARC established a sub-brand, “RIOT COLOR” and has been pushing into the color imaging marketplace. By now, I’m guessing that ARC has experienced at least some growth in revenues due to its non-AEC reprographics initiatives.

4) ARC has interests in businesses in China and India. ARC’s market share (of the total reprographics market) in those two extremely large nations has to be very small, considering the very short period of time that ARC has established its interests in those two countries. Which gives ARC the opportunity to grow its revenues in two large countries with enormous populations and huge demand for housing, hospitals, schools, universities, retail, office buildings, infrastructure improvements, etc. I’m guessing that ARC’s revenues and EPS will benefit from its interests in China and India.

I don’t like to bet against Brad Safalow of PAA Research, for, as I said earlier, he hit the numbers “right on the money” last quarter. But.....

My estimates for ARC’s numbers for Q2 2010:
Revenues, $119.5 (million)
EPS: $.08

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