It has been about a month since the last earnings report for Pitney Bowes (PBI - Free Report) . Shares have lost about 24.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Pitney Bowes due for a breakout? 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 catalysts.
Pitney Bowes Q1 Earnings Miss Estimates, Trims Guidance
Pitney Bowes reported first-quarter 2019 adjusted earnings of 12 cents per share lagging the Zacks Consensus Estimate by 9 cents. Moreover, the figure declined 57.1% year over year.
The year-over-year decline in earnings can be attributed to reduction in revenues, primarily due to weakness in Presort business and lower equipment sales.
Total revenues declined 3.1% year over year to $868.4 million. Excluding favorable foreign currency exchange impact of approximately $10 million, revenues declined 2% to $878.4 million.
Notably, in the reported quarter, Pitney Bowes inked a deal to divest its SMB businesses based across six Europe countries — Sweden, Denmark, Norway, Finland, Italy and Switzerland — to BAVARIA Industries Group AG in a bid to enhance go-to-market strategy. This limited revenue growth by almost $6 million. Considering market exit impact, revenues (at cc) declined 1% year over year to $872.4 million.
Quarter in Detail
Commerce services (46.2% of total revenues) grew 5% from the year-ago quarter (up 6% after adjusted for currency) to $401.1 million. While Global Ecommerce revenues improved 8% to $266.3 million, Presort Services of $134.8 million remained almost flat year over year.
Global Ecommerce revenues benefited from strong performance in parcel and shipping volumes. However, reduction in cross border volumes limited growth.
Increased volumes of Flats processed, First Class mail and Standard Class mail supported Presort Services segment. However, shift in mix toward big clients led to lower revenue per piece, which negatively impacted growth.
SMB Business solutions (45.4% of revenues) declined 10% year over year (down 9% after adjusted for currency) to almost $394 million. Revenues declined 7% when adjusted for both currency and exits from select Europe-based markets.
North America Mailing revenues declined 7% to $315.5 million, owing to sluggish equipment sales.
Moreover, International Mailing revenues fell 20% to $78.5 million owing to declining equipment sales. This can be attributed to weakness across France and Germany. However, it was marginally offset by growth in Japan and the U.K.
Software solutions (8.4% of revenues) declined 4% year over year (down 2% after adjusted for currency) to $73.3 million. Reduction in license revenues impacted results. However, improving SaaS revenues, and increase in smaller deal wins were other catalysts which limited the decline in revenues.
In the first quarter, adjusted EBITDA declined 30.2% from the year-ago quarter to $108.2 million. Adjusted EBITDA margin contracted 520 bps on a year-over-year basis to 12.4%.
Segment EBITDA decreased 20% from the year-ago quarter to $159.3 million. Commerce services EBITDA declined 40% from the year-ago quarter to $23.8 million. SMB Business solutions EBITDA fell 16% year over year to $131.3 million. Software solutions EBITDA declined 12% year over year to $4.2 million.
Segment EBIT decreased 25% from the year-ago quarter to $124.6 million.
Segment Commerce services EBIT plummeted 98% from the year-ago quarter to almost $0.5 million. Global Ecommerce reported a loss of almost $14.6 million compared with a loss of nearly $7.7 million in the year-ago quarter, on account of business mix including lower margin services. Presort Services EBIT declined 44% to $15.1 million owing to higher labor and transportation costs, and client mix including big customers lowering margins and revenue per piece.
SMB Business solutions EBIT fell 15% year over year to $122.4 million. Margins were impacted by lower equipment sales.
Software solutions EBIT plummeted 32% year over year to $1.7 million owing to lower license revenues.
Adjusted EBIT margin contracted 500 bps to 13.8%.
Balance Sheet & Cash Flow
As of Mar 31, 2019, cash and cash equivalents (including short term investments) were $904.3 million as compared with $926.7 million at the end of the previous quarter.
Long-term debt (including current portion) was $3.255 billion compared with $3.266 billion reported at the end of previous quarter.
Net cash from operations was $69.7 million compared with $102.7 million in the previous quarter. Free cash flow came in at $31.5 million compared with $153 million in the prior quarter.
In the reported quarter, Pitney Bowes returned $48 million to shareholders, which includes dividend payments worth $9 million and repurchase of 5.6 million shares worth $39 million.
The company incurred expenses of $8 million under restructuring payments and capital expenditures worth $29 million in the quarter.
For 2019, the company trimmed outlook, primarily owing to dismal performance of Presort Services business.
Pitney Bowes now projects revenues (after adjusted for foreign currency) to increase in the range of 1-3% over 2018, compared with growth rates estimated in the range of 1-4% earlier.
Adjusted earnings are envisioned between 90 cents and $1.05 per share, compared with prior guided range of $1.05-$1.20.
Free cash flow is now anticipated between $200 million and $250 million, compared with earlier predicted range of $225-$275 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -16.67% due to these changes.
At this time, Pitney Bowes has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Pitney Bowes has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.