It has been about a month since the last earnings report for Pitney Bowes Inc. (PBI - Free Report) . Shares have lost about 3.5% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Pitney Bowes Q2 Earnings Lag Estimates, Sales Down Y/Y
Pitney Bowes reverted to its dismal earnings miss trend after posting a solitary earnings beat last quarter. The company’s adjusted earnings of $0.33 per share missed the Zacks Consensus Estimate of $0.36. Also, on a year-over-year basis, adjusted earnings fell 15.4%.
On a GAAP basis, the company reported earnings per share of $0.26, down 7.1% compared with the year-ago figure. A rise in total costs, along with a drab revenue performance proved to be a drag on the earnings performance.
Inside the Headlines
Total revenue in the quarter was $821.4 million, down 1.7% year over year on a reported basis. Revenues were flat, when adjusted for currency impact.
Two of the company’s three segments, namely, Small and Medium Business (“SMB”) and Enterprise Business Solutions (“EBS”), declined year over year, proving a drag on the top-line performance.
On a reported basis, Small and Medium Business (“SMB”) Solutions revenues dipped 3% year over year to $436.4 million. The tepid performance was due to softness in the North American Mailing business (down 1%) and International Mailing Business (down 11%). Lower recurring revenue streams and rental revenues led to the lackluster performance of the North American Mailing business. Additionally, decline in recurring revenues and poor equipment sales proved to be a drag on the International Mailing Business.
Enterprise Business Solutions (“EBS”) revenues were down 4% year over year to $204.0 million. While Presort Services (up 2%) drove top-line growth of this segment, it was more than offset by the drab performance of the production mail business (down 11%). Lower sorter equipment sales and support service revenues weighed down on sales of the production mail business. Higher “Standard Class” mail volumes drove sales of this segment.
Digital Commerce Solutions reported 4% year-over-year growth in sales to $180.9 million, supported by strong Global e-commerce business (up 14%), and slightly offset by decline of Software business (down 4%). Robust volumes in the UK outbound marketplace and growth in domestic shipping volumes acted as tailwinds for the Global e-commerce business. Lower license revenues played a spoilsport for Software solutions sales.
Liquidity and Cash Flow
As of Jun 30, 2017, free cash flow was $18.4 million compared with $85.9 million as of Jun 30, 2016.
As of Jun 30, 2017, the company’s cash and cash equivalents totaled $840.6 million compared with $764.5 million at the end of Dec 31, 2016. Long-term debt as of Mar 31, 2017, was $2,543.5 million, down from $2,750.4 million as of Dec 31, 2016.
The company tweaked its guidance for full-year 2017. Currently, it expects 2017 adjusted earnings per share to lie in the range $1.70–$1.78 compared with the earlier guided range of $1.70–$1.85. Revenues, on a reported basis, are expected to see flat to 1% growth year over year compared with the previous guidance of 2% decline to 1% growth. Further, the company revised its free cash flow for 2017 to be in the range of $400-$430 million compared with the earlier range of $400–$460 million.
On a positive note, Pitney Bowes believes that new products and digital capabilities of SMB, expansion of the Presort Services network and robust increase in e-commerce volume will act as major catalysts, raising the top line for full-year 2017. Moreover, the company’s focus on operational excellence will help it trim to costs and expenses, thus supplementing growth.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.
At this time, the stock has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #4 (Sell). We are expecting a below average return from the stock in the next few months.