AI, Google Cloud And Print Services Will Unlock Future Value

Key Takeaways

• Expansion into tech-enabled marketing services and AI-driven personalization is shifting Quad toward higher-margin, stable revenue streams beyond traditional print.
  
• Operational efficiencies, strategic partnerships, and print's continued relevance are supporting improved profitability, cash flow, and sustained client demand.
  
• Persistent declines in core print sales, margin pressures, client concentration risks, and secular print headwinds challenge growth, with reliance on asset sales amid limited organic earnings improvement.

Catalysts

Provides marketing solutions in North America, Mexico, Central America, the Caribbean, Europe, the Middle East, Africa, South America, and Asia.

• Quad's investments in AI-driven data analytics (such as Audience Builder 2.0 and partnerships with Google Cloud) and household-based data stacks are enabling more precise personalization and targeting for direct mail and omnichannel campaigns, positioning the company to capture incremental revenue growth as brands seek higher ROI from integrated physical and digital marketing.
  
• Expansion into high-margin, tech-enabled marketing services-such as In-Store Connect retail media networks, variable data printing, and the Household Fusion postal optimization program-is steadily shifting Quad's revenue mix away from traditional print toward services with structurally higher net margins and enhanced earnings stability.
  
• The resilience of print as a premium, trusted channel-especially for regulated sectors like financial services, healthcare, and retail-combined with regulatory headwinds for digital-only marketing (e.g., third-party cookie deprecation), is likely to sustain or grow demand for Quad's targeted print and direct mail solutions, supporting top-line stability and potential revenue growth.
  
• Ongoing operational efficiencies from automation, process optimization, and cost reduction (including benefit from recent facility sales and consolidations), coupled with disciplined capital allocation, are anticipated to further lower SG&A/COGS and improve free cash flow and net earnings.
  
• Strategic acquisitions and partnerships (like the Enru co-mail asset purchase and expansion into new retail/grocery chains for In-Store Connect) are building scale, deepening client relationships, and creating cross-selling opportunities that should drive higher client retention, wallet share, and both top
• and bottom-line growth.

Quad/Graphics Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Quad/Graphics's revenue will decrease by 7.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.6% today to 6.4% in 3 years time.
• Analysts expect earnings to reach $134.6 million (and earnings per share of $2.7) by about July 2028, up from $-17.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 4.3x on those 2028 earnings, up from -16.9x today. This future PE is lower than the current PE for the US Commercial Services industry at 25.5x.
• Analysts expect the number of shares outstanding to decline by 2.97% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.86%, as per the Simply Wall St company report.

Quad/Graphics Future Earnings Per Share Growth

Risks

• Organic net sales declined by 2% year-over-year in Q1 2025 (excluding European operations divestiture), and management projects a further 2%–6% organic sales decline for the full year, indicating ongoing structural headwinds in core print businesses and challenging revenue growth prospects.
  
• The company's EBITDA margin declined to 7.2% from 7.7% YoY, and lower sales combined with increased investments in innovation led to decreased adjusted EBITDA, signaling persistent margin pressure as legacy print volumes decline and investments in new business lines may not offset profit erosion in the near-to-medium term.
  
• Quad/Graphics faces customer concentration risk, as highlighted by the material impact from the loss of a single large grocery client in early 2025, which creates ongoing volatility and vulnerability in both revenues and operating margins if further client losses or contract renegotiations occur.
  
• Postal rate increases-a 10% rise expected in July for most mailers-pose a secular threat to print/mail demand and client marketing budgets, with Quad's mitigations (like promotional postal discounts and optimization programs) providing only partial, temporary offset; sustained rate hikes likely drive further volume attrition and secular print decline, negatively impacting long-term print revenue.
  
• The company continues to divest assets (European operations, plant closures) and faces negative free cash flow for three quarters each year due to business seasonality and advance inventory purchases, reflecting capital intensity and suggesting a lack of structural growth-with also a risk that asset sales are being used to fund operations and shareholder returns in the absence of organic earnings growth.

Valuation

• The analysts have a consensus price target of $9.45 for Quad/Graphics based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.1 billion, earnings will come to $134.6 million, and it would be trading on a PE ratio of 4.3x, assuming you use a discount rate of 9.9%.
• Given the current share price of $5.69, the analyst price target of $9.45 is 39.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.