Pitney Bowes Inc.(PBI - Analyst Report) reported first-quarter 2013 pro forma earnings per share of 42 cents, which was in line with the Zacks Consensus Estimate. Quarterly earnings were down 19.2% year over year from 52 cents per share. Earnings for the first quarter 2012 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.
GAAP earnings for the quarter were 34 cents a share, including costs associated with the recent debt tender.
Total revenue was $1.17 billion, down 4.4% year over year from $1.22 billion. The top line benefited from growth in the Production Mail and Mail Services segments. This was fully offset by continued decline of recurring revenue streams in the Small and Medium Business segment. Revenues were also in line with the Zacks Consensus Estimate.
Small and Medium Business (SMB) Solutions segment sales declined 5% year over year on a constant currency basis to $598 million, as a result of a 7% fall in North America Mailing revenues. Revenues in International Mailing segment was flat year over year.
Enterprise Business Solutions segment sales increased by 4% year over year to $569 million, led by a 3% increase in revenue from worldwide production mail and 4% revenue growth in Mail services. This was partially offset by a 20% revenue decline in Software, 2% decline in Management services and a 16% decline in Marketing services.
The company incurred total SG&A expense of approximately $377.2 million in the quarter versus approximately $405.5 million in the first quarter of 2012. R&D expense was $33.3 million versus $34.1 million. Income from continuing operations of the company was $101.7 million compared with $161 million in the prior-year period. Lower income was attributable to higher cost of equipment sales and higher cost of business services.
Cash and cash equivalents were $909.7 million with long-term debt of $3.6 billion and shareholder’s equity of $73.1 million compared to prior-year figures of $913.2 million, $3.7 billion and shareholders’ equity of $110.6 million, respectively.
Free cash flow for the quarter was $107 million. During the quarter, the company used $75 million of cash for dividends and $16 million for restructuring payments.
Initiatives during the Quarter
During the quarter, the company collaborated with GrayHair Software Inc. to improve its customer service solutions with IMb (Intelligent Mail Barcode) compliance and mail tracking in the U.S. his new mail tracking software, MailTrak with Commingle solutions will help Pitney’s Presort Services Customers significantly who are looking for greater postal discounts with better visibility of their mails. This service will be offered in four different options.
Concurrent with the earnings release, Pitney reiterated its guidance for 2013. 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 revenues in its SMB Solutions Group though the segment is expected to witness negative growth.
For 2013, revenue growth, excluding the impact of currency, is expected to be in the range of flat to up 3%. 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 #3 (Hold). However, some other companies that can be considered at the moment are Progressive Software Corp. (PRGS - Snapshot Report), which has a Zacks Rank #1 and Symantec Corp. (SYMC - Analyst Report) and Adobe Systems Inc. (ADBE - Analyst Report) having Zacks Rank #2 (Buy).