Why Shares of R.R. Donnelly & Sons Surged Today

By Timothy Green Markets Fool.com

What happened

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Shares of marketing and business communications services provider R.R. Donnelley & Sons (NYSE: RRD) surged on Wednesday after the company reported its first-quarter results. RRD beat analyst estimates for both revenue and earnings, sending the stock up 18% by 11:15 a.m. EDT.

So what

RRD reported first-quarter revenue of $1.68 billion, up 1.9% year over year and $90 million above the average analyst estimate. Net organic sales declined by 0.7%, but the acquisition of Precision Dialogue and the recognition of revenue that was previously part of LSC Communications and Donnelley Financial Solutions, both spun-off late last year, drove revenue higher.

Image source: RRD.

The variable print segment suffered a 0.4% decline in sales, driven by commercial and digital print volume declines and broad price erosion. The strategic services segment posted a 10.4% revenue increase, driven by the revenue previously part of the spinoff companies. And the international segment reported a 1.4% revenue decline, driven by volume declines, price pressure, and unfavorable changes in foreign exchange rates.

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Non-GAAPearnings per share (EPS) came in at $0.14, up from a loss of $0.02 during the prior-year period and $0.15 better than analysts were expecting. GAAP EPS was a loss of $0.71, driven by a charge related to the sale of RRD's equity interest in LSC.

Now what

RRD expects to produce revenue between $6.8 billion and $7.0 billion in 2017, along with non-GAAP EPS between $1.00 and $1.30. While the revenue guidance was unchanged, the EPS guidance represented a $0.10 boost compared to previous guidance.

RRD President and CEO Dan Knotts looked forward to the rest of the year: "With the spinoffs behind us, we are focused on growing our business, and I am pleased to report that we remain on track to deliver against our previous net sales and income from operations guidance for 2017, and are raising our full year non-GAAP diluted earnings per share and operating cash flow guidance due to lower expected taxes."

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Timothy Green has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.