Pitney Bowes Inc. (PBI) reported its fourth quarter 2010 earnings per share from continuing operation of 36 cents, underperforming the Zacks Consensus Estimate of 61 cents and prior-year estimate of 54 cents.
For full-year 2010, the company reported earnings per share from continuing operations of $1.51 compared with $2.09 in 2009.
Revenue
Total revenue was $1.4 billion in the quarter, a decrease of 1% year over year. For full-year 2010, total revenue was $5.4 billion, down 3% year over year.
SMB Solutions revenue inched down 3% to $716 million. Within SMB Solutions, US Mailing revenue was $473 million (down 5%) and International Mailing revenue was $244 million (up 1%).
Enterprise Business Solutions revenue remained flat at $718 million. Within Enterprise Business Solutions, Worldwide Production Mail revenue was $177 million (up 11%), Software revenue was $111 million (up 6%), Management Services revenue was $251 million (down 8%), Mail Services revenue was $146 million (up 1%) and Marketing Services revenue was $33 million (down 3%).
Income and Expenses
Operating Income was $127.9 million compared with $167.5 million in the prior year quarter. SG&A expense was $455.7 million compared with 483.3 million and R&D expense was $38.9 million compared with $43.6 million.
Balance Sheet
Cash and cash equivalents was $484.4 million at the end of the quarter compared with $386.0 million at the end of the prior quarter. Long-term debt was $4,329 million compared with $4,243 million.
Free cash flow was $289 million for the quarter and $961 million for the year. On a GAAP basis, the company generated $284 million in cash from operations for the quarter and $951 million for the year. In 2010, improved working capital and reduced capital expenditures increased free cash flow by $72 million.
Pitney Bowes had $50 million authorized in share repurchase program, which increased by $100 million to $150 million. The company plans to utilize this authorization over the next twelve to eighteen months.
Outlook
The company believes it is poised to deliver profitable growth in 2011 and beyond by leveraging its performance in 2010. Pitney Bowes continues to implement its Strategic Transformation program and is confident of harnessing substantial benefits ahead.
The company is a leading supplier of products and services in most of its business segments. Its meter base and its ability to place and finance meters in key markets contribute significantly to its revenue and profitability. However, all segments face competition from a number of companies. We believe that its vast 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.
However, many of Pitney Bowes contracts are with government entities. Government contracts are subject to extensive and complex government procurement laws and regulations, along with regular audits of contract pricing and business practices.
Pitney Bowes Inc. was incorporated in the state of Delaware on April 23, 1920, as Pitney Bowes Postage Meter Company. The company is the largest provider of mail processing equipment and integrated mail solutions in the world. It offers a full suite of equipment, supplies, software and services for end-to-end mailstream solutions, which enable its customers to optimize the flow of physical and electronic mail, documents and packages across their operations. A major competitor of Pitney Bowes is Siemens Inc. (SI).
We currently maintain our Neutral rating on Pitney Bowes Inc. with a Zacks #2 Rank (short-term Buy recommendation) over the next one-to-three months.
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