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Pitney Bowes (PBI) Q3 Earnings: Stock Likely to Disappoint?

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Pitney Bowes Inc. (PBI - Free Report) is slated to report third-quarter 2016 results before the opening bell on Nov 1.

Last quarter, the company had posted a negative surprise of 7.1%. The company has missed estimates thrice in the past four quarters, resulting in an average negative surprise of 8.2%.

Let's see how things are shaping up for this announcement.

Factors to Consider

Pitney Bowes’ third-quarter 2016 results are expected to face the brunt of the sustained weak performance in its software and North American Mailing business. Though the company has adopted multiple measures to boost profits at the software segment, it has not yet produced tangible results. In addition, an uncertain global economic environment is expected to further hurt the production mail and software businesses, marring the company’s top-line performance.

Moreover, a rise in the company’s operating and marketing expenses might weigh on its bottom-line performance in the quarter, as the previously planned ERP implementation in the U.S. is expected to raise operating expenses. However, benefits of ERP materialization are expected to materialize in the to-be reported quarter, which will boost profits.

In addition to this, currency translations have affected the company’s financials over the past few quarters and are expected to impact earnings and revenues in the upcoming release as well.

Despite these negatives, Pitney Bowes’ steady transformation process over the past three years to create long-term flexibility for investment reinstates hope. In this regard, the company’s decision to exit low-margin countries like Mexico, South Africa and five markets in Asia is likely to drive profitable growth.

Moreover, some of the company’s recently completed acquisitions, including Borderfree e-commerce, Real Time Content and EngageOne Video software solution, are anticipated to contribute to top-line growth in the to-be-reported quarter. Also, the recent buyout of Enroute Systems has fortified the company’s shipping logistics portfolio and is expected to propel growth, going forward.

Pitney Bowes formed a couple of strategic alliances with Alpine Consulting and Lighthouse Computer Services. Further, the company introduced its flagship product, SmartLink, in the Canadian market. SmartLink has already been successfully deployed in the U.S. and the initiative will help expand its reach further.

These steps will help the company gain market traction and boost revenues. Furthermore, implementation of “go-to-market” strategies in major markets and transition to a new sales model in the mailing business in France is estimated to stabilize the company’s SMB business.

PITNEY BOWES IN Price and EPS Surprise

PITNEY BOWES IN Price and EPS Surprise | PITNEY BOWES IN Quote

Earnings Whispers

Our proven model does not conclusively show that Pitney Bowes will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 47 cents.

Zacks Rank: Pitney Bowes has a Zacks Rank #4 (Sell). As it is, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Ashford Hospitality Prime, Inc. , scheduled to release results on Nov 2, has an Earnings ESP of +9.76% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shire plc , slated to release earnings results on Nov 1, has an Earnings ESP of +1.25% and a Zacks Rank #2.

Diamondback Energy, Inc. (FANG - Free Report) , scheduled to release results on Nov 1, has an Earnings ESP of +5.88% and a Zacks Rank #2.

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