Can Transcontinental Achieve Its Goals?

Dec.20.07 | About: Transcontinental Inc. (TCLAF)

UBS has cut its earnings per share [EPS] forecast and price target for Transcontinental Inc. (OTCPK:TCLAF) after a mixed fourth quarter from the printer and publisher.

While the company met analyst Eric Mencke’s expectations in terms of revenue and earnings before interest, taxes, depreciation and amortization (EBITDA), it fell short on EPS, he told clients in a note. Transcontinental will also stop providing annual EPS guidance in favor of long-term targets.

For the 2006 to 2010 period, its compound annual growth rate is expected to be 5% for revenue and 10% for EPS, excluding foreign exchange effects. Mr. Mencke thinks these goals are achievable given that Transcontinental’s revenue primarily comes from niche markets.

“Furthermore, its strong balance sheet could be utilized to acquire businesses that may become distressed if the economy weakens,” he said.

While boosting his EBITDA forecasts for 2008 and 2009 slightly, his EPS estimates were cut to C$1.64 and C$1.82, from C$1.74 and C$1.90, respectively.

Mr. Mencke’s price target moves down C$2 to C$23, while his rating remains a “buy.”