USTR..... >>Cary, I joined you on USTR last week. The stock looks good, but I have one concern.While they continue to come up with quarter after quarter of record earnings, their growth rate is slowing down. Have you noticed this as well ?
It does look like the Co. is aware of this problem and has taken some steps to rev up their growth. Particularly their internet connection.<<
Sorry for the late response Amigo, I've been on vacation. I think there are several contributing factors that are going to come into play besides the internet connection (which has enormous potential).
1. United Stationers is the largest wholesaler of office supply products including furniture computer supplies etc. Their acquisition of Azerty is going to increase their position and help in their buying power for computer products. The economy of scale has yet to be fully realized with Azerty. This should help improve the bottom line in upcoming quarters.
2. Here is an excerpt from USOP (trading symbol OFIS) about new revenue headed United's way.
>> Company Moves to Single Wholesaler, Revises Supply Chain Initiatives
The Company said that reducing costs and increasing productivity within its warehousing and distribution activities are a central focus of its accelerated change initiatives. As part of its program to reduce costs and increase efficiency, the Company announced that it has agreed to a nationwide, first-call wholesaling relationship with United Stationers, Inc. (''United''). The Company previously split first-call arrangements between United and SP Richards Company.
''We have made adjustments to our distribution strategy that we believe will reduce costs and increase return on assets. We will not spend our capital for new distribution centers except where we can quickly generate a strong return on the investment,'' said Mr. Pieper. ''We expect the relationship with United to help us serve customers more efficiently, particularly where a new facility is not warranted. This is critical to our goal of providing our customers with a low-cost, high-value offering.''
The Company said that it currently operates 89 warehouses and 112 cross-dock facilities throughout the U.S., in addition to its seven distribution centers. Plans through the end of calendar year 2000 call for more than a 60% reduction in the number of warehouses and more than a 25% reduction in facility square footage being used for stocking and distribution. The Company said it does not have any current plans to build new distribution centers during this time. <<<
Revenue figures from USOP last year were.... >>For fiscal 1999, the Company said that total revenue from continuing operations was $2.66 billion, an increase of 2% from $2.61 billion in fiscal 1998<<
Some of those revenues were already included in United's because of second call and first call situations that they were already involved with at some of USOP's locations. There were also a lot of direct purchases but I believe there is a big chunk of business yet to come United's way.
3. The recent merger between BT and CEXP
biz.yahoo.com
is going to also add additional revenues. CEXP was currently sharing first call position with United and SP Richards. BT is the one really controlling the merger and they at one time were using SP Richards as their first call but switched to United. I am looking for CEXP to follow the same path.
4. Currently they are trading at a trialing 12 month PE of 12. Based on next years numbers of 2.54 that gives them a stock price of 30.5 or an increase of 20% for the year. I think they deserve at least a PE of 15 possibly 20 but that might be a stretch depending on how growth numbers and the internet alliance pans out. Assuming either one of those situations. I am looking for a range of somewhere between $33 and $44 for this year and next year somewhere between $38 and $50.
As always, but what do I know.
Cary
PS.... I do like how it has held up very nicely the last couple of days in this market.
|
