Pitney Bowes Exceeds Barely

Pitney Bowes Inc. (PBI) reported earnings per diluted share from continuing operations of 55 cents, compared with 67 cents in the prior year. This was higher than the Zacks Consensus Estimate of 54 cents. Earnings reflect the negative impacts of 1 cent per diluted share associated with currency and 1 cent per diluted share from incremental pension costs when compared with the prior year.

Revenue for the quarter was $1.36 billion compared with $1.55 billion in the prior year, a decline of 12%. A stronger dollar reduced revenue by 2% year-over-year.

The sustained nature of the recessionary environment is also driving some fundamental changes in the way businesses and customers connect, communicate and complete transactions in the global marketplace. Companies in most industries still have limited visibility and uncertain outlooks resulting in rising unemployment and ongoing caution about capital expenditures. These factors have contributed to depress mail volumes in mail intensive industries. Mailstream Solutions revenue declined 12% on a constant currency basis compared with the prior year. On a reported basis, revenue declined 14% to $925 million and earnings before interest and taxes (EBIT) declined 21% to $227 million compared with the prior year. Within Mailstream Solutions, U.S. Mailing revenue declined 12% to $491 million and EBIT declined 19% to $178 million compared with the prior year. Revenue declined by 4% and EBIT declined by 8% compared with the second quarter. International Mailing revenue declined 11% on a constant currency basis compared with the prior year.

Mailstream Services revenue declined 6% on a constant currency basis compared with the prior year. On a reported basis, revenue declined 8% to $432 million and EBIT increased 26% to $50 million compared with the prior year. Management Services revenue declined 8% on a constant currency basis compared with the prior year. Mail Services revenue declined 3% on a constant currency basis.

As a result of its strategic alliance with Hewlett-Packard in Sep 2009, the company launched the IntelliJet Printing System for high volume transactional mailers. During the quarter it also announced two partnerships that will help it expand its presence in the growing Asia Pacific market. Cannon marketing Japan will distribute one of its lower end metering systems to small and medium sized businesses in the Japanese market. It has also partnered with Digital China to distribute a variety of mailing solutions and software systems that provide variable data composition to small and medium sized businesses throughout China .

Free cash flow was $223 million for the quarter while on a GAAP basis the company generated $249 million in cash from operations. Free cash flow benefited from lower capital expenditures and lower levels of finance receivables. During the quarter the company paid $75 million of dividends to common shareholders. Cash and equivalents were $460 million with long-term debt at $4.2 billion and shareowners’ equity at $77 million.

The company expects earnings per diluted share from continuing operations, on a GAAP basis for the year, within the range of $2.09 to $2.21. The current Zacks Consensus Estimate is $2.25 per share. Revenue for the year is now expected to decline by 5% to 8% on a constant currency basis and 8 to 11% on a reported basis.

Pitney Bowes Inc. provides mail processing equipment and integrated mail solutions in the United States and internationally. It offers a suite of equipment, supplies, software, and services for end-to-end mailstream solutions, which enable its customers to optimize the flow of physical and electronic mail, documents, and packages across their operations. The company’s Mailstream Solutions group engages in the sale, rental, and financing of mail finishing, mail creation, shipping equipment, and software; and provision of supply, support, and other professional services, as well as payment solutions in the United States and internationally. Its Mailstream Services group offers facilities management services; secure mail services; reprographic, document management services; and litigation support and eDiscovery services. The company, formerly known as Pitney Bowes Postage Meter Company, was founded in 1920 and is headquartered in Stamford , Connecticut . Nearest competitor is Siemens AG (SI).

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