Shares of Deluxe Corp. rallied Thursday after the nation’s largest check printer raised its third-quarter earnings guidance by nearly 40%.
The brighter outlook for the Shoreview, Minn., company is a sharp reversal from three months ago, when it took a $45 million charge for mothballing a major technology project and posted an unexpected loss.
John Kraft, an analyst at D.A. Davidson & Co., said the earnings revision represented quicker-than-expected results of cost cutting, but not an improvement in Deluxe’s underlying business. Deluxe, beleaguered by the decline in checks, has been repositioning itself as a general-purpose printer and supplier of office products to small businesses.
“This may be the first sign of the results of” its efforts to trim expenses, Mr. Kraft said. “It may be coming earlier than expected.”
Deluxe shares were trading at $21.22 Thursday afternoon, up 16.47% from Wednesday’s close. The stock has been edging higher in recent weeks, from a recent low of $17.10 on Sept. 29.
The company said Thursday that its three business segments are performing better than expected, primarily because of lower manufacturing and administrative expenses.
It said it expects third-quarter earnings of 59 cents to 61 cents a share, up 39.5% from the midpoint of its previous guidance of 41 cents to 45 cents, which it projected in July when it reported second-quarter earnings.
Full-year earnings are projected to be at least $1.60 per share; the previous expectation was $1.41 to $1.51.
The company has not raised any expectations for the top line; it said that third-quarter revenue should be about of $398 million, below the midpoint of its previous guidance.
Deluxe has struggled to rebuild its business as Americans use fewer paper checks. In July it abandoned a major project to replace portions of its order-capture, billing, and pricing systems. At the time, Lee Schram, who was named chief executive officer in May, said he wanted to reorganize the company and cut costs.
In August, Deluxe announced that it would close one of its largest call centers.
Deluxe is to report its third-quarter results Oct. 26.
