A month has gone by since the last earnings report for Pitney Bowes Inc. (PBI - Free Report) . Shares have lost about 2.1% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is PBI 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 drivers.
Pitney Bowes delivered first-quarter 2018 adjusted earnings of 30 cents per share that beat the Zacks Consensus Estimate by a penny but decreased 16.1% year over year.
Revenues increased 17.5% year over year to $983.2 million. Excluding favorable foreign currency exchange impact of $19.5 million, revenues increased 15% to $963.6 million.
Commerce services (38.8% of revenues) surged 72.6% from the year-ago quarter (up 71% after adjusted for currency) to $381 million. While Global Ecommerce revenues soared 179.7% to $246.6 million, Presort Services inched up 1.3% to $134.5 million.
Global Ecommerce revenues benefited from 10% revenue growth in Newgistics driven by strong performance in parcel and fulfilment volumes.
Presort Services revenues increased due to higher revenue per piece along with increased volumes of First Class mail and flats processed.
SMB Business solutions (43.1% of revenues) declined 5.6% year over year (down 8% after adjusted for currency) to $423.3 million. North America Mailing revenues declined 8.5% to $325.4 million. However, this was partially offset by 5.2% increase in International Mailing revenues, which totaled $97.9 million.
Software solutions (8.3% of revenues) increased 4.3% year over year (up 1% after adjusted for currency) to $81.6 million. Production Mail (9.9% of revenues) rose 9.3% (up 6% after adjusted for currency) to $97.2 million.
In the first quarter, segment EBITDA declined 7.1% from the year-ago quarter to $214.2 million. Segment EBITDA margin contracted 580 basis points (bps) on a year-over-year basis to 21.8%.
Commerce services EBITDA dipped 2.6% from the year-ago quarter to $39.9 million. SMB Business solutions EBITDA declined 10.4% year over year to $156.7 million. Software solutions EBITDA soared 50.3% year over year to $7.3 million. Production Mail EBITDA increased 5.4% to $10.3 million.
Segment EBIT declined 12.1% from the year-ago quarter to $169.1 million. Segment EBIT margin contracted 580 bps on a year-over-year basis to 17.2%.
Commerce services EBIT plunged 27% from the year-ago quarter to $19.3 million.
Global Ecommerce reported a loss of $7.7 million wider than a loss of $4.3 million in the year-ago quarter. The loss was primarily attributed to higher investments on market growth opportunities and operational excellence initiatives. Presort Services EBIT declined due to higher labor and transportation costs.
SMB Business solutions EBIT declined 12.3% year over year to $135.4 million.
Software solutions EBIT soared 76.4% year over year to $4.8 million. Production Mail EBIT increased 7.3% to $9.6 million.
Consolidated adjusted EBIT declined 12.7% from the year-ago quarter to $119.8 million. Adjusted EBIT margin contracted 420 bps to 12.2%.
Balance Sheet & Cash Flow
As of Mar 31, 2018, cash and cash equivalents (including short term investments) were $775.5 million as compared with $1.06 billion as of Dec 31, 2017.
Long-term debt was $3.25 billion down from $3.56 billion at the end of previous quarter.
GAAP cash flow from operations was $83 million, while free cash flow was $65 million.
For 2018, Pitney Bowes expects revenues (after adjusted for foreign currency) to increase in the range of 11-15% over 2017.
Adjusted earnings are now expected between $1.15 and $1.30 per share.
Free cash flow is now expected between $300 million and $350 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. Last month, the consensus estimate has shifted downward by 26.5% due to these changes.
Pitney Bowes Inc. Price and Consensus
At this time, PBI has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. 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.
Our style scores indicate that the stock is more suitable for value investors than growth investors.
Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. It's no surprise PBI has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.