A month has gone by since the last earnings report for Pitney Bowes (PBI - Free Report) . Shares have added about 6.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Pitney Bowes due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Pitney Bowes Tops Q3 Earnings Estimates, Revenues Up Y/Y
Pitney Bowes Inc. delivered third-quarter 2018 adjusted earnings of 27 cents per share that beat the Zacks Consensus Estimate by a couple of cents but decreased 18.2% year over year.
Revenues increased 14% year over year to $836.9 million. Excluding favorable foreign currency exchange impact of $4 million, revenues increased 13.5% to $832.8 million. This marks the fifth consecutive year-over-year growth in revenues.
Commerce services (43% of total revenues) surged 59% from the year-ago quarter to $358 million. While Global Ecommerce revenues soared almost 119% to $233 million, Presort Services increased 5% to $125 million.
Global Ecommerce revenues benefited from 10% revenue growth (on a pro forma basis) in Newgistics on the back of strong performance in parcel and fulfillment volumes. Notably, Global Ecommerce revenues grew 19% year over year, excluding Newgistics.
Presort Services revenues improved due to increased volumes of First Class mail along with Bound & Packet Mail and Flats processed. However, lower revenue per piece primarily owing to increased volumes of mail from big clients’ limited growth.
SMB Business solutions (48% of revenues) declined 4% year over year (down 3% after adjusted for currency) to $399 million. North America Mailing revenues declined 2% to $314 million. Moreover, International Mailing revenues also fell 9% to $85 million due to declining equipment sales. This can be attributed to weakness across the U.K. and France. However, it was marginally offset by growth in Japan and Australia.
Software solutions (9% of revenues) decreased 19% year over year both on reported basis and after adjusted for currency to $79 million, primarily attributable to lower license revenues owing to decline across location intelligence and customer information management.
In the third quarter, adjusted EBITDA inched up 0.7% from the year-ago quarter to $148.1 million. Adjusted EBITDA margin contracted 220 basis points (bps) on a year-over-year basis to 17.8%.
Commerce services EBITDA increased 6% from the year-ago quarter to $25.1 million. SMB Business solutions EBITDA rose 10% year over year to $151.5 million. Software solutions EBITDA slumped 71% year over year to $6 million.
Segment EBIT decreased 5.3% from the year-ago quarter to $137.5 million. Segment Commerce services EBIT declined 69% from the year-ago quarter to $3.1 million.
Global Ecommerce reported a loss of almost $14.3 million compared with a loss of nearly $9.6 million in the year-ago quarter. Presort Services EBIT declined owing to higher labor and transportation costs.
SMB Business solutions EBIT increased 12% year over year to $130.9 million.
Software solutions EBIT decreased 81% year over year to $3.5 million.
Adjusted EBIT margin contracted 250 bps to 11.7%.
Balance Sheet & Cash Flow
As of Sep 30, 2018, cash and cash equivalents (including short term investments) were $815.2 million as compared with $745.6 million at the end of the previous quarter.
Long-term debt (including current portion) was $3.27 billion, down from $3.57 billion at the end of previous quarter.
Cash flow from operations was $116 million, while free cash flow was $94 million.
Pitney Bowes paid dividend worth $35 million to shareholders and incurred $12 million under restructuring payments.
Pitney Bowes reaffirmed guidance for fiscal 2018.
For 2018, Pitney Bowes continues to expect revenues (after adjusted for foreign currency) to increase in the range of 11% to 15% over 2017.
Adjusted earnings are envisioned between $1.15 and $1.30 per share.
Free cash flow is anticipated between $300 million and $350 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months.
At this time, Pitney Bowes has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, 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.
Pitney Bowes has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.