Pitney Bowes Inc. (PBI - Free Report) has been having a dismal run on the bourses of late. Over the last three months, the stock has lost 36.5%, underperforming the industry’s decline of 4.9%. The current level also lags the S&P 500’s gain of 16.8%.
Here we take a look at some of the major issues plaguing Pitney Bowesat the moment:
Negative Estimate Revision Trend
The estimate revision trend for Pitney Boweshas been dismal. For the current quarter, one analyst revision moved south compared with no movement in the opposite direction over the last 60 days. As a result, the Zacks Consensus Estimate for full-year earnings fell 19.2% to $1.18 per share. The stock has a Zacks Rank #5 (Strong Sell), indicating probabilities of underperformance in the near term.
In the first quarter, segment EBITDA margin contracted 580 basis points (bps) on a year-over-year basis to 21.8%.
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%.
Global Ecommerce reported a loss of $7.7 million wider than a loss of $4.3 million in the year-ago quarter. The loss can primarily be attributed to higher investments on market growth opportunities and operational excellence initiatives. Presort Services EBIT declined due to higher labor and transportation costs.
Consolidated adjusted EBIT declined 12.7% from the year-ago quarter to $119.8 million. Adjusted EBIT margin contracted 420 bps to 12.2%.
Negative Earnings Surprise History
The company outpaced theZacks Consensus Estimate in only two out of the trailing four quarters, with an average negative surprise of 4.3%.
What is Hurting the Stock?
In general, licensed software businesses are always susceptible to swings based on large transactions. Given the scale of Pitney Bowes’ business, it remains vulnerable to those swings. Though the company has taken multiple efforts to broaden the base of its business, fluctuations in license revenues pose as a major headwind.
This apart, success in managing relationships with providers, including the costs of outsourcing functions and operations not central to the company’s businesses, may also affect its financial performance adversely.
Furthermore, most of the company’s revenues are directly or indirectly subject to regulation and oversight by the USPS (United States Postal Service) and foreign postal authorities. It also depends on a healthy postal sector in its operating regions, which could be influenced by legislative or regulatory changes. Further, adverse changes in postal regulations across key markets and intensifying competition may also affect profitability negatively.
Changing business mix is likely to impact the bottom line adversely. During the first quarter, margins were impacted by decline in SMB, investments in global e-commerce and shifting mix of its portfolio. As Pitney Bowes continues to transform portfolio and make necessary investments to ramp up sales, it expects pressure on margins in the short term.
Few better-ranked stocks in the broader technology sector are NVIDIA Corporation (NVDA - Free Report) , Micron Technology, Inc. (MU - Free Report) and Akamai Technologies, Inc. (AKAM - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NVIDIA, Micron and Akamai have long-term earnings per share growth rate of 10.3%, 8.2% and 14.4%, respectively.
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