We recently maintained a Neutral recommendation on Pitney Bowes Inc. (PBI).
Pitney Bowes Inc. is the largest provider of mail processing equipment and integrated mail solutions in the world. The company offers a full suite of equipment, supplies, software and services for end-to-end mailstream solutions, which in turn, enable its customers to optimize the flow of physical and electronic mail, documents and packages across their operations.
Pitney Bowes’ products and services are marketed through an extensive network of direct sales offices in the U.S. and through a number of its subsidiaries and independent distributors and dealers in many countries throughout the world. It also uses direct marketing, outbound telemarketing and the Internet to reach its existing and potential customers.
The company sells to a variety of businesses: governmental, institutional and other organizations. It has a broad base of customers, and is not dependent on any one customer or type of customers for a significant part of its revenue.
On February 9, 2012, the company came out with its fourth-quarter 2011 earnings per share from continuing operations of $0.97, above the Zacks Consensus Estimate of $0.60 and prior-year earnings of $0.66. The earnings for the quarter include net tax benefit of $0.37 as a result of agreement between the company and the IRS on the tax treatment of a number of issues, as well as revised tax calculations.
For 2011, the company’s earnings per share from continuing operations were $2.70, compared with $2.23 in 2010.
Total revenue was $1.3 billion, down 6.5% y/y as a result of a fall in SMB sales, some delayed large business deals and prevailing global economic uncertainty. Foreign currency effect was neutral to total revenue.
For 2011, total revenue was $5.3 billion, down 3% year over year.
Small and Medium Business (SMB) Solutions segment sales declined 6% year over year on a constant currency basis to $666 million, as a result of a fall in North America Mailing revenue by 9%, partially offset by a 1% increase in International Mailing revenue.
Enterprise Business Solutions segment sales decreased by 7% year over year to $675 million, led by 9% decline in revenue from Worldwide Production Mail, 8% in Management Services, 10% in Software and 2% in Mail Services. The negative effect was partially offset by a 4% increase in Marketing Services revenue.
The company expects its revenue growth trend to improve in 2012 with a number of initiatives designed to drive new growth opportunities. For 2012, revenue growth, excluding the impact of currency, is expected to be in the range of 2% growth to a decline of 2% as compared to 2011. The company expects earnings per share from continuing operations to be in the range of $2.05 to $2.25. Free cash flow for 2012 is expected to be in the range of $700 million to $800 million.
Pitney Bowes continued to make investments during 2011, as per its Strategic Transformation programs. However, the revenue for the year failed to show any growth, declining 3% year over year and for the fourth quarter dipped 6.5%. Benefits from the Strategic Transformation programs were evident from EBIT improvement in four of the company’s seven business segments as a result of increased operating efficiency.
Continuing economic uncertainty remains a matter of concern. The uncertain environment prevented few customers from deferring new equipment purchases and capital commitments during the second half of the year. A major competitor of Pitney Bowes is Siemens Inc. (SI).
We currently maintain our Neutral rating on Pitney Bowes Inc. with a Zacks #3 Rank (short-term Hold recommendation) over the next one-to-three months.
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