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Yet Another Miss for Core-Mark

Zacks Equity Research

Core-Mark Holding Company Inc. (CORE) recently posted third quarter 2012 adjusted earnings of $1.01 per share, which were again below the Zacks Consensus Estimate of $1.20. The reported earnings also lagged the year-ago earnings of $1.14 per share.

The company reported net sales of $2.31 billion for the quarter, up 4.0% year over year. The increase in revenue was mainly attributable to the strong presence of the company in the southeast U.S., driven by the Couche-Tard contract in the third quarter of 2011, partially offset by one less day of business in this quarter and a 5.3% slip in comparable cigarette carton sales.

Quarter Highlights

Sales at the Cigarette category crept up 2.0% to $1.6 billion with carton volume being flat. However, excluding the contribution from the new business in the Southeastern U.S., impact of one less selling day and a fall in comparable cigarette carton sales, cigarette sales plunged 5%.

Sales at the Non-cigarette category climbed 9.1% to $718.4 million on the back of same-store sales growth of 4% and additional customers.

During the quarter, adjusted gross profit expanded 3.9% to $125.8 million, attributed to an increase of 6.1% in non-cigarette gross profit.

Total operating expenses climbed 3.9% to $105.0 million due to higher warehousing and distribution expenses. However, as a percentage of net sales, total operating expenses were flat year over year.

Adjusted EBITDA plunged 13.0% to $28.7 million in the reported quarter.


The company lowered its earnings outlook for 2012 from its previous expectation range of $2.75 to $2.90 to $2.75 to $2.85. However, it continues to expect net sales of $9.0 billion for 2012, up 11.0% year over year, owing to the benefits from the FCGC acquisition, new contract wins, market expansion and vendor consolidation initiatives. The company expects capital expenditure to be approximately $30 million.

Our Take

The company, which distributes packaged consumer products to the retail industry, reported lower-than-expected third quarter 2012 results and also trimmed its earnings guidance. Hence, we expect estimates to go down in the coming days. The Zacks Consensus Estimates for 2012 and 2013 are pegged at $2.80 and $3.90, respectively.

As a result, we also have a Zacks #4 Rank on the stock, implying a Sell rating over the short term. We also reiterate our long-term Underperform recommendation on the stock. However, one of its peers Farmer Brothers Co. (FARM) currently has a Zacks #2 Rank, implying a Buy rating over the short term.

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