Acquired SGK and Aurora Could Lead to Outperformance
- Given the potential of the Schawk and Aurora Casket acquisitions, Matthews could generate as much as $65 million, or $1.40 per share, in combined cost synergies over the next three years.
- The shares are 10% off the all-time high of $60 set in November 2015, despite EPS projected up 8% to a record $3.28 in FY16 and 12% in FY17.
- Free cash flow (estimated at $106 million in FY17), consistently in excess of net income, can be used to pay down debt from the Schawk and Aurora acquisitions, for share repurchases and dividend increases (raised for 21 consecutive years and compounding at 13% over the last five).
Matthews International is a provider of brand solutions, memorialization products and industrial technologies. The company's reporting segments are: SGK Brand Solutions, which includes brand development, deployment and delivery; Memorialization, which includes a line of memorialization products used primarily in cemeteries, funeral homes and crematories; and Industrial Technologies, which designs, manufactures and distributes a range of marking and coding equipment and consumables, industrial automation solutions, and warehouse automation systems, as well as manufactures and markets products and systems that employ different marking technologies, including laser and ink-jet printing.
Great Lakes Review is located in Cleveland, Ohio, was founded in 1981 and became a division of Wellington Shields & Co. LLC in 2011. Great Lakes Review is a research boutique focused on the fundamentally-oriented investor seeking companies that dominate their respective specialty niche regardless of industry. The objective is to make money for the long-term by gradually accumulating a diversified portfolio from a universe of no more than 30 companies. Although short-term-oriented accounts will be alerted to trading opportunities, aggressive sell recommendations are triggered only by a deterioration in long-term fundamentals, not by short-term blips or investor fancy. Coverage of those names that lose their earnings momentum or earnings predictability may be dropped and replaced with more vital candidates.
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