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Pitney Bowes Inc. (PBI - Analyst Report) reported second-quarter 2014 adjusted earnings per share from continuing operations of 46 cents, in line with both the Zacks Consensus Estimate and prior-year quarter figure. In the prior-year quarter, the adjusted earnings included a non-recurring tax benefit of 5 cents, excluding which earnings increased 11% year over year.

 

 

Total Revenue

Total revenue for the quarter was $958.4 million, up 1% from year over year. The top line primarily benefited from strong performance of the company’s Digital Commerce Solutions segment, which was mostly offset by weakness in Small and Medium Business (SMB) Solutions and Enterprise Business Solutions segment.

Segment Performance

Small and Medium Business Solutions segment sales declined 3% year over year to $524.5 million. The decline was attributable to a 5% year-over-year dip in North American Mailing revenues which stood at $371.2 million. Revenues in the International Mailing segment increased 2% year over year to $153.3 million.

In the North American Mailing business, the company’s go-to-market strategy showed an uptrend June onwards but was offset by the prevailing sluggishness in its recurring revenues businesses. The International Mailing business benefited from recurring revenue streams, driven by stabilization of the installed equipment base in the previous quarters.

Enterprise Business Solutions segment sales decreased 8% year over year to $223.0 million. Though the segment’s Presort Services revenues increased 4% year over year to $111.3 million, there was a 17% year-over-year decline in revenues in the company’s Worldwide Production Mail business at $111.8 million. The company’s Presort Services revenues benefited from the continuing improvements in mail qualifications for presort discount, but the one-time costs of installing a number of large inserting and production print equipments for the production mail business proved to be a drag on the company’s financials.

The Digital Commerce Solutions segment reported revenues of $211.0 million, reflecting a robust 27% year-over-year increase. Revenues primarily benefited from continued strong growth in the company’s E-commerce solutions for cross-border package delivery. Growth in the company’s software license, shipping solutions and marketing services businesses also contributed to the segment’s performance.

Expenses

The company’s selling, general and administrative (SG&A) expense decreased to $338.4 million from $353.9 million in the year-ago quarter. Research and Development (R&D) expense increased to $28.6 million compared with $27.3 million in the prior-year quarter. Income from continuing operations of the company was $92.1 million in the quarter, compared with $84.6 million in the prior-year period. In the quarter, the company made restructuring payments worth $15 million.

Other Financial Details

Exiting the quarter, cash and cash equivalents were $1.0 billion, up from $907.8 million as of Dec 31, 2013. However, long-term debt decreased to $3.0 billion as of Jun 30, 2014 from $3.3 billion as of Dec 31, 2013. Shareholders’ equity was $281.7 million compared with the prior-year figure of $205.2 million. Adjusted free cash flow for the quarter stood at $162.3 million. The company disbursed $47 million for dividends.

Outlook

Concurrent with the earnings release, Pitney Bowes raised its guidance for fiscal 2014.

For 2014, the company raised its guidance for revenue growth (excluding the impacts of currency translations) to the range of 1% to 3% compared with the previously projected band of -1% to 2%.

Pitney Bowes also updated its guidance for adjusted earnings per share for 2014 to be in the range of $1.80 – $1.90, compared with the earlier guidance of $1.75 to $1.90 per share. The company reiterated its outlook for free cash flow, which is anticipated to be in the range of $475 million to $575 million.

Zacks Rank

Pitney Bowes currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the office automation and equipment sector include Canon Inc.(CAJ - Snapshot Report), Xerox Corporation (XRX - Analyst Report) and Ricoh Company, Ltd. (RICOY). While Canon sports a Zacks Rank #1 (Strong Buy), both Xerox Corporation and Ricoh Company carry a Zacks Rank #2 (Buy).

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