Friday, March 25, 2011

R.W. Baird upgrades American Reprographics Co (ARC) to “outperform”

Per an article on, “American Reprographics Company (ARC) Upgraded by Robert W. Baird & Co. to “Outperform” (March 25, 2011)”

03/25/2011 – 3:35 am PDT

Equities research analysts at Robert W. Baird & Co. upgraded shares of American Reprographics Company (NYSE: ARC) to an “Outperform” rating in a research note released to investors today.

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Joel’s comments:

Based on the upgraded rating – to “outperform” - it “sounds like” RW Baird’s equities research analysts are “bullish” on ARC’s future performance. Not knowing the details in the “note” that RW Baird issued to investors, I can only speculate as to the reasons why RW Baird’s analysts upgrated ARC’s shares to outperform. So, from a “speculation” perspective, here we go:

1. RW Baird sees a near-term resurgence in non-residential design / development / construction activity? Anyone who follows the AIA ABI Index is aware that the Index-reading has been 50 or above 50 in five out of the last six months. Could that be one of the reasons why RW Baird upgraded ARC shares to outperform?

2. RW Baird sees ARC gaining significant traction with “Riot Color”? By now, ARC has established at least 10 ARC “Riot Color” production centers in the U.S. ARC is pursuing color business in both the non-AEC and AEC segments. Could that be one of the reasons why RW Baird upgraded ARC shares to outperform?

3. RW Baird sees ARC gaining significant traction with FM and MPS initiatives? During the past three months alone, “Reprographics 101” has posted several articles about the MPS market space and about opportunities to move into, and grow in, that space. There’s heavy competition in that space from mega-companies, such as HP, Xerox, OCE, Ricoh, Canon. In spite of that, could ARC’s MPS initiatives be one of the reasons why RW Baird upgraded ARC shares to outperform?

4. RW Baird sees ARC’s “cloud” computing initiative (ishipdocs) gaining significant traction in months to come, driven partly by ARC’s upcoming (April) release of ishipdocs 2.0? ishipdocs one a Bertl award last fall for “the Best Innovative Digital Document Fulfillment To on the Cloud.” Could that be one of the reasons why RW Baird upgraded ARC shares to outperform?

5. RW Baird sees ARC gaining momentum from PlanWell Collaborate? Released by ARC’s PlanWell team last fall, it is ARC’s answer for A/E/C firms who want a technology solution, all combined, for project management, project collaboration and document management. Could that be one of the reasons why RW Baird upgraded ARC shares to outperform?

6. RW Baird sees some light at the end of the tunnel for the abysmal situation the “residential” design / development / construction market is currently mired in? Last month, sales of “new” single family homes hit an all time modern-era low (since statistics started begin kept.). If we’ve hit bottom, I guess there’s no way to go but up. Could that be one of the reasons why RW Baird upgraded ARC shares to outperform?

7. Perhaps ARC’s previously stated intention to aggressively pursue “market share” (i.e., take business away from “independent” reprographics companies” got RW Baird’s attention? During the past three years, business in the reprographics community has been awful for most reprographers. Perhaps that means that there are a number of independent reprographers who are now, or will shortly be, ready to sell out to ARC? Could that be one of the reasons why RW Baird upgraded ARC shares to outperform?

8. Perhaps one of RW Baird’s analysts read Service Point Solutions’ statements regarding the robust recovery SPS expects to experience in 2011 and beyond?

9. Perhaps one of the analysts at RW Baird has acquired a working crystal ball?

10. Perhaps one of the analysts at RW Baird has been working with a *Ouija-board?

Okay, I listed 10 possible reasons why RW Baird’s equity research analysts might believe that ARC’s shares rate an “outperform” rating at this point, so the list I put forth qualifies for David Letterman’s “top 10 reasons why”.

In September 2010, the AIA ABI Index hit 50 or above for the first time since December 2007, and, as we pointed out in a post yesterday on this blog, has been at 50 or above since then, with the exception of one “blip”. If the Chief Economist of the AIA (Kermit Baker) is right (regarding his characterization of the index as a predictor of future construction activity) then we “should see” an increase in construction activity 9 to 12 months from September 2010 – so, sometime during the period June to August 2011. From a reprographics perspective, and considering the fact that American Reprographics Co (ARC) is the largest reprographics company in the U.S. (and the World), and for RW Baird’s outperform call to prove to be a wise one, we should, I would think, see at least some evidence, by the end of Q2 2011, that ARC’s sales and profits are rebounding and beginning to grow once again. Personally, I don’t think that ARC’s Q1 2011 results are going to show much of a rebound, if any at all. But, by Q2 2011, and, especially, by Q3 2011, 2011, there has to be evidence of a rebound. If there is, then perhaps ARC’s shares will “outperform”. If not, then there’s always the chance that ARC’s shares won’t “outperform.”

I really hate to say this, but, in the past, reprographers have always benefitted from natural disasters that cause the destruction of property. Earthquakes, Tsunamis, Hurricanes, Tornadoes, mudslides, and wild-fires cause significant damage to property. Property eventually gets rebuilt. Historically, the “rebuilding” process generates revenues and profits for A/E firms, for Contractors, and, yes, for reprographers. The recent mega-earthquake and tsunami in Japan were horrific. When you see the “before and after” photos of villages and towns that were literally wiped off the face of the earth, it is absolutely heart-wrenching. Our thoughts are with the people of Japan.

*From Wikipedia, the free encyclopedia:

*A Ouija board (pronounced "wee-gee" or "wee-ja" and possibly derived from the French and German/Dutch words for "yes", oui and ja),[1] also known as a spirit/fire key board or talking board, is a flat board marked with the letters of the alphabet, the numbers 0-9, the words 'yes' 'no' and 'goodbye', and other symbols and words are sometimes also added to help personalize the board. The Ouija board can supposedly be used to communicate with spirits of the dead. Although nobody knows where the idea for such a device came from, there are records of Ouija-like instruments being used in ancient China, Greece, Rome and many other countries.[2] It uses a planchette (small heart-shaped piece of wood) or movable indicator to indicate the spirit's message by spelling it out on the board during a séance. The fingers of the séance participants are placed on the planchette, which then moves about the board to spell out words or become physically manifested. It has become a trademark that is often used generically to refer to any talking board.

Following its commercial introduction by businessman Elijah Bond in the late 1890s, the Ouija board was regarded as a harmless parlor game unrelated to the occult until American Spiritualist Pearl Curran popularized its use as a divining tool during World War I.[3] Mainstream Christian religions and some occultists have associated use of the Ouija board with the threat of demonic possession and some have cautioned their followers not to use Ouija boards.[4]

While Ouija believers feel the paranormal or supernatural is responsible for Ouija's action, it may be parsimoniously explained by unconscious movements of those controlling the pointer, a psychophysiological phenomenon known as the ideomotor effect.[5][6][7] Despite being debunked by the efforts of the scientific community, Ouija remains popular among many young people.[3]

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