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Pitney Bowes (PBI) Stock Down Despite Q3 Earnings Beat

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Pitney Bowes Inc. (PBI - Free Report) reported third-quarter 2020 adjusted earnings of 8 cents per share, beating the Zacks Consensus Estimate by 60%. However, the bottom line declined 66.7% year over year. This is likely to have hurt investor sentiments.

Despite strong top line performance, shares of Pitney Bowes fell 28.5% following third-quarter 2020 results on Oct 30, eventually closing at $5.31.

Notably, total revenues improved 13% year over year to $891.9 million. Adjusting for foreign currency exchange, revenues increased 13% year over year to $889.4 million. Management is optimistic on investments in shipping starting to pay off. Notably, Shipping-related revenues represented 50% of total revenues in the reported quarter.

Quarter in Detail

Commerce Services increased 31% (up 31% after adjusted for currency) from the year-ago quarter’s figure to $537.7 million. Global Ecommerce revenues rose 47% to almost $410 million, while Presort Services of $127.7 million declined 3% year over year.

Global Ecommerce revenues benefited from strong growth in Domestic Parcel, Digital Delivery and Cross Border Services volumes. Notably, Global Ecommerce Domestic Parcel volumes more than doubled from prior year.

Presort Services revenues declined due to sluggishness in Marketing Mail and First Class volumes. Markedly, Presort Services productivity measures resulted in 115,000 fewer labor hours to sort nearly 4.1 billion pieces.

However, Marketing Mail Flats and Bound Printed Matter volumes grew at a double-digit rate on a year-over-year basis and limited the decline.

Sending Technology Solutions declined 7% year over year (down 7% after adjusted for currency) to $354.2 million. The downside was due to COVID-19 induced sluggishness in equipment sales, support services, supplies and financing.

However, higher business service revenues, driven by increased usage of shipping offerings and capabilities, limited the decline. In fact, SendTech shipping revenues were $32 million, growing at a double-digit rate. Moreover, SendTech shipped nearly 12,000 units of the SendPro Mailstation since its launch in April.

Pitney Bowes Inc. Price, Consensus and EPS Surprise

Pitney Bowes Inc. Price, Consensus and EPS Surprise

Pitney Bowes Inc. price-consensus-eps-surprise-chart | Pitney Bowes Inc. Quote

Adjusted EBITDA Details

In the third quarter, adjusted EBITDA declined 15.2% from the year-ago quarter’s figure to $92.5 million.

Segment EBITDA fell 13% from the year-ago quarter’s figure to $140.1 million. Segment EBIT slumped 15% from the year-ago quarter’s figure to $107.3 million.

Balance Sheet & Cash Flow

As of Sep 30, 2020, cash and cash equivalents and short-term investments were $820.4 million compared with $1.02 billion as of Jun 30, 2020.

As of Sep 30, 2020, long-term debt (including current portion) was almost $2.6 billion, compared with $2.72 billion as of Jun 30, 2020. The company repaid the $100 million drawn against the revolving credit facility in the third quarter.

Cash flow generated was $103.8 million compared with $153.1 million of net cash generated in operations in the previous quarter. Free cash flow was $84.6 million compared with free cash flow of $148.4 million in the prior quarter.

In the reported quarter, Pitney Bowes paid out dividends worth $9 million.

The company incurred expenses of $5 million under restructuring payments and capital expenditures worth $21 million in the reported quarter.

Guidance

The company refrained from providing guidance for 2020 due to uncertainties related to the COVID-19 outbreak and its negative impact on consumer demand and supply chains.

Zacks Rank & Stocks to Consider

Currently, Pitney Bowes carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Qorvo (QRVO - Free Report) , Marchex (MCHX - Free Report) and NVIDIA Corporation (NVDA - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks (Strong Buy) here.

Marchex, Qorvo and NVIDIA are scheduled to report earnings on Nov 4, Nov 5 and Nov 18, respectively.

Long-term earnings growth rate of Qorvo, Marchex, and NVIDIA is pegged at 12.35%, 15%  and 20.07%, respectively.

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