Commercial Printer LSC Communications Downgraded By JPMorgan On Fundamental Concerns

Shares of commercial printing company LSC Communications Inc LKSD have rallied 35 percent over the past two months — fueled in part by an upward revision to revenue guidance — prompting JPMorgan to press the sell button. 

The Analyst

Analyst Alexia Quadrani downgraded shares of LSC Communications from Neutral to Underweight but maintained a $14 price target, suggesting 14-percent downside. 

The Thesis

Despite LSC Communication's track record of making small-to-midsized acquisitions, increasing its printing capabilities and breadth of product offering, the M&A activity may not realize the expected cost synergies, Quadrani said in a Friday note. (See the analyst's track record here.) 

This gap between expectations and reality means potential downside risk for LSC Communications estimates, Quadrani said. 

Fundamentally, the company is likely to be pressured by ongoing print declines, margin compression resulting from volume and pricing pressures and the ongoing shift from traditional office product retailers to online networks, the analyst said. 

JPMorgan sees risk to the company's ability to finance its dividend due to the uncertainty surrounding the "longer-term" health of the core business.

The recent spike in shares is unsustainable, Quadrani said. 

"Overall, we believe risk is skewed to the downside and look for better longer-term fundamental trends in the core business before becoming more positive on the stock." 

The Price Action

LSC Communications shares were plunging 12 percent to $14.28 at the time of publication Friday morning. 

Related Links:

HP's Q2 Print, 3-D Printing Business Trigger Maxim Upgrade

3D Printing ETF Can Print A Rebound

Posted In: Alexia QuadraniJ.P. MorganAnalyst ColorDowngradesPrice TargetAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.