SNC for a bounce next week. Credit to HANDSON for bringing this stock to my attention.
Snyder Communications Falls on Higher Expected Costs (Update3) (Updates with closing stock activity.)
Bethesda, Maryland, July 30 (Bloomberg) -- Shares of Snyder Communications Inc., the world's largest direct-marketing company, fell 28 percent after the company said it will spend $23 million next year to reorganize, more than analysts expected.
Bethesda, Maryland-based Snyder shares fell 7 11/16 to 19 3/8 in trading of 10.6 million, more than 15 times the three- month daily average. The stock was second-biggest loser on the New York Stock Exchange.
The company plans to spin off its health-care marketing division into a publicly traded company, Ventiv Healthcare. Snyder was expected to spend about $8 million to $10 million to restructure in 2000, analysts said. ''It's millions of dollars of additional expenses that none of the analysts had factored into their earnings models for 2000,'' said Adam Bergman, an analyst with Scott & Stringfellow in Norfolk, Virginia, who downgraded his rating on the stock to long-term ''buy'' from ''strong buy.'' ''Disappointed is the wrong word. I would say surprised by the magnitude or at least unprepared by the magnitude of the additional expenses.''
Ventive will offer such services as educational programs aimed at physicians, marketing plans for drugmakers, like Pfizer Inc. and Merck & Co., and sales through its own network. Snyder also said it will issue new shares by September to track its marketing services division Internet site, circle.com.
The division develops and maintains Web sites for a variety of companies, including Bell Atlantic Corp., Bergman said.
Additional Expenses
Bergman said Snyder's additional expenses are for buying computers, hiring staff and marketing services for the two companies. The company said the restructuring wouldn't result in any charges against earnings. ''Instead of reinvesting their cash flow into acquisitions, they're now reinvesting into their business. That's the key change in strategy,'' said Amy Brodsky, an analyst at Prudential Vector Healthcare Group.
The company, with 1998 sales of $815.3 million, will continue to provide direct-marketing and advertising services around the world through its Brann Worldwide division. Snyder competes with Omnicom Group Inc. and Interpublic Group of Companies Inc.
Separately, Snyder said late yesterday that second-quarter earnings rose 24 percent on strong sales in all units.
Net income on a pro forma basis rose to $23.3 million, or 31 cents a share, from $17.7 million, or 25 cents, in the year- earlier period, matching the average estimate of eight analysts polled by First Call Corp. Revenue rose 26 percent to $255.7 million from $202.6 million.
Daniel Snyder, chairman and chief executive of the company, and some partners bought the National Football League's Washington Redskins in May for $800 million. The purchase price was the highest paid for a North American sports franchise.
Snyder Communications has offices in the U.S., Canada, the U.K., France, Italy, the Netherlands, Germany and Hungary. |
