Pitney Bowes Inc. (PBI) reported third-quarter 2011 earnings per share from continuing operations of 69 cents, above the Zacks Consensus Estimateof 54 cents and prior-year earnings of 55 cents.
The earnings in the quarter benefited $0.05 per diluted share from insurance reimbursements and $0.08 per diluted share from IRS tax settlement. In the previous two quarters, the company’s earnings suffered from loss due to the fire at the company’s Dallas presort facility, which in the reported quarter was offset by the insurance reimbursements.
Total Revenue
Total revenue was $1.3 billion, down 3% y/y as a result of a fall in equipment sales and business services revenue resulting from rising global economic uncertainty, partially offset by a rise in software revenue. Foreign currency effect benefited revenue by 2%.
The company reported a revenue increase in all its segments.
Segment Performance
Small and Medium Business (SMB) Solutions segmentsalesdeclined 7% year over year on a constant currency basis to $653 million, as a result of a fall in North America Mailing (down 8%) as well as International Mailing revenue (down 1%).
Enterprise Business Solutions segment sales decreased by 4% year over year to $646 million, led by 16% decline in revenue from Worldwide Production Mail, 6% in Management Services and 3% in Mail Services. The negative effect was partially offset by 11% growth in software revenue and 5% in Marketing Services. Americas and Asia Pacific witnessed particularly strong demand for software solutions, including data management, analytics and location intelligence.
Income
The company incurred total SG&A expense of approximately $430.7 million in the quarter versus approximately $435.3 million in the third quarter of 2010. R&D expense was $35.6 million versus $38.5 million. Income from continuing operations of the company was $116.9 million compared with $96.1 million in the prior-year period.
Balance Sheet
Cash and cash equivalents were $715.2 million with long-term debt of $4.2 billion and shareholder’s deficit of $45.3 million.
Free cash flow in the quarter was $259.8 million versus $221.4 million in third quarter of 2010.
Outlook
The company’s result in the third quarter suffered from the prevailing global economic slowdown as a result of which it has decreased its 2011 revenue growth expectation to minus 3% to minus 4% compared with the prior guidance range of minus 2% to positive 1%. The company now expects adjusted earnings per diluted share for 2011 in the range of $2.30 to $2.35 versus prior estimate of $2.15 to $2.35.
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 #4 Rank (short-term Sell recommendation) over the next one-to-three months.
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