Quad stock surges

2016 Mid-Year Economic Forecast

After suffering losses in 2015 and a lousy start to 2016, the U.S. stock market recovered to post modest gains in the first half of 2016.

The Dow Jones Industrial Average fell 2.23 percent in 2015, its first negative year since 2008, to finish the year at 17,425. Then the Dow plunged in the early part of 2016, bottoming out at 15,660 in February. Since then, the Dow has recovered and for the first half of the year was up 2.9 percent. The S&P 500 rose 2.7 percent in the first half of the year.

Stock prices rose during the first half of the year for most of the publicly traded companies in southeastern Wisconsin. Of the 39 publicly-held companies based in the region, 22 saw their stock price rise during the first half of the year.

Leading the way, by far, was Sussex-based Quad/Graphics Inc., which saw its stock price shoot up 150 percent during the first half of the year, from $9.30 a share on Jan. 1 to $23.29 per share at the end of June.

That is a major reversal for Quad stock, which fell 59 percent in 2015. The first half increase in Quad’s stock price completely wiped out the 2015 decline.

Investors are responding favorably to big changes made by Quad. In November, the company announced a $100 million cost reduction plan. As part of that plan, the company closed plants in Colorado, Connecticut, Pennsylvania and Georgia last year.

Quad reported a $3.8 million profit in the first quarter of 2016, a huge improvement from the first quarter of 2015, when the company reported a $35 million loss. For all of 2015, Quad reported a net loss of $641.9 million.

The first quarter of 2016 was the first quarter since the end of 2014 for which Quad had reported a profit.

Another local company that has endured major losses and had to make big cost cuts also saw its stock price surge during the first half of the year. Milwaukee-based mining equipment manufacturer Joy Global Inc.’s stock rose 68 percent during the first half of the year, to $21.14 per share.

Joy Global reported it lost $1.2 billion in 2015, $40 million in the first quarter of 2016 and $9.8 million in the second quarter of this year as the decline of global commodity markets devastated the mining industry.

The company has responded by making major changes to cut costs. In March, president and CEO Ted Doheny said the company planned to make more than $100 million in cost reductions this year. In May, the company announced plans to discontinue its heavy fabrication and welding departments in Milwaukee, eliminating 130 jobs.

Last year, Joy Global closed its Orchard Street plant, eliminating 51 jobs.

On the bright side, in June Joy Global reported it had received an order for two mining shovels headed to the Canadian oil sands and another for a longwall system in India. The two projects are worth almost $150 million.

While the stock prices for Quad and Joy Global surged during the first half of the year, after huge losses in 2015, the stock price for Bon-Ton Stores Inc. continues to drop rapidly. Bon-Ton’s stock price fell 33 percent during the first half of the year, to $1.41 at the end of June.

Bon-Ton, the parent company of Boston Store, with dual headquarters in Milwaukee and York, Pennsylvania, reported a first quarter net loss of $37.8 million.

The company announced a plan to sell and then lease back stores in Roseville and Duluth, Minnesota and Aurora, Illinois to Florida-based United Trust Fund Limited Partnership, but the deal, which would have saved Bon-Ton nearly $45 million, fell through.

In June, S&P Global Ratings downgraded Bon-Ton from CCC+ to CCC and said it has weak liquidity and increasing refinancing risk for a debt that matures in mid-2017. A default could be in the near future for the retailer, S&P credit analyst Mathew Christy predicted.

Brookfield-based health care software developer Connecture Inc. suffered the biggest first half drop in stock price among southeastern Wisconsin’s publicly held firms, falling 37 percent to $2.26. The company reported a first quarter net loss of $7.3 million. However, Connecture in May announced it had received a $52 million investment from a California-based private equity firm.

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Andrew is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, he is a lifelong resident of the state. He lives in Muskego with his wife, Seng, their son, Zach, and their dog, Hokey. He is an avid sports fan and is a member of the Muskego Athletic Association board of directors.

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