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Pitney Bowes Inc. (PBI - Analyst Report) reported fourth-quarter 2012 earnings per share from continuing operations of 56 cents, above the Zacks Consensus Estimate of 51 cents but below the prior-year earnings of 98 cents. The earnings for the quarter include net tax benefit of 37 cents as a result of an agreement between the company and the IRS on the tax treatment of a number of issues, as well as revised tax calculations.

For 2012, the company’s earnings per share from continuing operations were $2.18 compared with $2.75 in 2011. The Zacks Consensus Estimate for the year was $2.00.

Total Revenue

Total revenue was $1.3 billion; down 1% y/y. Foreign currency effect was neutral to total revenue. Revenue in the quarter was aided by improvement in revenue trend in four of its business segments.  

For 2012, total revenue was $4.9 billion, down 4% year over year.

Segment Performance

Small and Medium Business (SMB) Solutions segment sales declined 6% year over year on a constant currency basis to $644 million, as a result of a fall in North America Mailing revenue by 6%, partially offset by a 4% increase in International Mailing revenue.     

Enterprise Business Solutions segment sales increased by 1% year over year to $643 million, led by a 2% increase in revenue from Software, 5% in Management Services and 2% in Mail Services. The positive effect was partially offset by a 5% decrease in Marketing Services revenue and 6% in Worldwide Production Mail revenue.


The company incurred total SG&A expense of approximately $410.3 million in the quarter versus approximately $425.5 million in the fourth quarter of 2011. R&D expense was $32.4 million versus $40.9 million. Income from continuing operations of the company was $147.8 million compared with $23 million in the prior-year period.

Balance Sheet

Cash and cash equivalents were $913.3 million with long-term debt of $3.6 billion and shareholder’s deficit of $110.6 million compared to prior year figures of $856.3 million, $3.7 billion and shareholders’ deficit of $39 million, respectively.

Free cash flow in the quarter was $215.3 million versus $289.5 million in fourth quarter of 2010.


The company expects its revenue growth trend to improve in 2013 with a number of initiatives designed to drive new growth opportunities. In 2013, the Company expects revenue growth in its Enterprise Solutions Group and an improvement in revenue in its SMB Solutions Group though the segment is expected to still witness a negative growth.

For 2013, revenue growth, excluding the impact of currency, is expected to be in the range of flat to a 3% increase. The company expects earnings per share from continuing operations to be in the range of $1.85 to $2.00. Free cash flow for 2013 is expected to be in the range of $600 million to $700 million.

Pitney Bowes currently has a Zacks Rank #4 (Sell) which might not be a good stock to consider at the moment. However, some other companies that can be considered at the moment are Tyco International (TYC - Analyst Report) which has a Zacks Rank #1 and Symantec Corp. (SYMC - Analyst Report).

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