Pitney Bowes Inc. (PBI) reported earnings per share from continuing operations of 53 cents in the third quarter of 2010, just exceeding the Zacks Consensus Estimate of 52 cents. Revenues for the quarter came in at $1.3 billion, a decline of 1% year over year including currency effects.
U.S. mailing revenues declined by 6% compared with the prior year. Non-U.S. revenue increased by 1%, and was somewhat impacted by currency in the quarter.
Segment Results
Small and Medium Business (SMB) Solutions: An uncertain economic environment resulted in an increasing proportion of U.S. mailing customers extending leases for existing equipment. Sales to mid- and large-sized customers increased during the quarter.
International Mailing had a double-digit equipment sale growth in the quarter driven by the demand for postal rate updates for scales in France.
Enterprise Business Solutions
In Software there was increased demand for software solutions, including data management, analytics and CRM.
For Worldwide Production Mail, increased demand for the company’s high-speed, high integrity inserting systems, especially in the U.S.A, helped increase revenue growth and resulted in a higher backlog of customer orders.
Management Services continued to process increasing volumes of U.S.domestic presort mail and diversified its business mix as it expanded its presence in Standard Class mail volumes.
Free cash flow for the quarter was $221 million, while on a GAAP basis, the company generated $243 million in cash from operations. During the quarter, the company spent $77 million on dividends and $100 million to buy back 4.7 million common shares.
Outlook
Adjusted EPS from continuing operations for the year 2010 is expected to be in the range of $2.15 to $2.22. The company expects to generate free cash flow for 2010 above the range of $700 to $800 million.
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 revenues 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 competition. 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 received a number of patents for 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 Apr 23, 1920, as 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 Pitney Bowes.
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