Pitney Bowes Falls Short – Analyst Blog

Pitney Bowes Inc (PBI) reported earnings per share from continuing operations of 51 cents, falling short of the Zacks Consensus Estimate of 54 cents for the first quarter of 2010. Revenue for the quarter was $1.3 billion, a decline of 2% year over year.

U.S. revenue declined 5% year over year while outside of U.S. revenue declined 7% excluding the positive impact from currency exchange rates. Non-US operations represented 30% of the revenues in the quarter.

 

 

Mailstream Solutions: U.S. Mailing experienced improving trends in equipment sales during the quarter, particularly in its solutions applications for mid and higher volume mailers. Support services revenue also had improving trends in the quarter.

 

International Mailing was negatively affected by lower financing and rental revenue due to fewer equipment sales in prior periods. During the quarter, Production Mail continued to experience increased global customer demand for its high-speed inserting systems and related software. Demand was driven both by improving economic conditions in certain countries and some customer’s need to replace aging equipment.

 

In Software, revenue was down only slightly in the quarter versus the prior year on a constant currency basis despite continued transition to annuity-based pricing for some solutions.

 

Mailstream Services: New contracts for the quarter improved versus the prior year. Revenue for the quarter was adversely impacted by account contractions and terminations in the U.S. during the prior year, stemming from recessionary pressures as well as lower print and copy volumes.

 

Mail Services continues to process increasing volumes of pre-sort mail from existing customers and continues to diversify its mix of mail through growing standard class volumes. Marketing Services revenues declined versus the prior year because of decline in household moves.

 

Free cash flow was $294 million for the quarter and on a GAAP basis, the company generated $306 million in cash from operations. During the quarter the company used $80 million of cash for dividends to stockholders and reduced debt outstanding by $122 million.

 

 

The company expects to report EPS of $2.30 to $2.50 for FY2010. Restructuring charges are expected to be 32 cents to 48 cents per share. It also expects to generate free cash flow of $650 million to $750 million for FY2010.

 

The company is a leading supplier of products and services in the large majority of its business segments. Its meter base and continued ability to place and finance meters in key markets is a significant contributor to its current and future revenue and profitability. However, all segments face competition from a number of companies. We believe that its long experience and reputation for product quality, as well as its sales and support service organizations, are important factors in influencing customer choices with respect to its products and services.

 

Its significant investment in research and development operations differentiates it from competitors. It has many research and development programs that are directed toward developing new products and service offerings. As a result of these efforts, it has been awarded a number of patents with respect to several of its existing and planned products. However, its businesses are not materially dependent on any one patent, any group of related patents, any one license or any group of related licenses.

 

Pitney Bowes Inc. was incorporated in the state of Delaware on April 23, 1920, as the Pitney Bowes Postage Meter Company. Today, Pitney Bowes Inc. is the largest provider of mail processing equipment and integrated mail solutions in the world.

 

We currently have a Neutral recommendation on PBI.