Pitney Bowes Inc. (PBI) reported third-quarter 2012 GAAP earnings per share of 38 cents, 20.8% lower than the Zacks Consensus Estimate of 48 cents and down a significant 55.3% from the prior-year earnings of 85 cents.
Non-GAAP earnings (excluding the one-time items) were 47 cents a share, missing the Zacks Consensus Estimate by a penny and down 31.9% on a year-over-year basis. Profits during the quarter were affected by the continued global weakness primarily in the International Mailing and Software.
Total Revenue
Total revenue was down 6.5% year over year to $1.22 billion, as a result of weak global economic conditions, which mainly affected the International Mailing and Software and Management Services business segments. On a constant currency basis, revenue contracted 5%, partially offset by equipment sales growth in Production Mail and 3% growth in presort revenue.
The company reported revenue contraction across all its segments.
Segment Performance
Small and Medium Business (SMB) Solutions segment sales declined 8% year over year on a constant currency basis to $602 million, as a result of a 6% fall in North America Mailing revenue and a 13% decline in International Mailing revenue.
Enterprise Business Solutions segment sales fell 5% year over year to $614 million, due to a 19% decline in Software revenue, 6% drop in Management Services, 1% dip in management services and 4% fall in Marketing services. This was partially offset by a 12% growth in the Worldwide Production Mail.
Income
Pitney Bowes incurred total SG&A expense of approximately $400.8 million in the quarter versus approximately $427.4 million in the third quarter of 2011. R&D expense was $36.7 million versus $35.6 million in the year-ago quarter. The company’s income from continuing operations was $107.6 million compared with $99.8 million in the prior-year period.
Balance Sheet
Cash and cash equivalents were $424.8 million with long-term debt of $3.3 billion and shareholder’s equity of $124 million at the end of the quarter.
Outlook
The company reiterated its 2012 guidance. GAAP earnings from continuing operation are expected to be in the range of $2.22 to $2.42 per share, including net tax benefits of 11 cents per share and benefit from the sale of leveraged lease assets in Canada of 6 cents per share. Excluding these, adjusted earnings per share from continuing operations are projected in the range of $2.05 to $2.25. Revenue growth, excluding the impact of currency, is expected to be down 2% to up 2% year over year. Free cash flow for 2012 is expected to be in the range of $700 million to $800 million.
Pitney Bowes Inc. 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 enables 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 long-term Neutral recommendation on Pitney Bowes Inc. and a Zacks #2 Rank (Buy rating) over the short term.
PITNEY BOWES IN (PBI): Free Stock Analysis Report
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