What to Expect From Pitney Bowes (PBI) Stock in Q4 Earnings?

Pitney Bowes Inc. PBI is slated to release fourth-quarter 2017 results before the opening bell on Jan 31.

Last quarter, the company reported earnings of 33 cents, lagging the estimates by23.3%. Overall, Pitney Bowes has a dismal earnings surprise history, having missed estimates thrice inthe trailing four quarters, resulting in an average negative surprise of 8.6%.

Let's see how things are shaping up for this announcement.

Factors at Play

Pitney Bowes’ concerted efforts to transform business have started to show results as evident from growth across most business lines. For instance, the new channels that the company has been developing over the last four years namely, the tele and digital channels, proved conducive to growth in its Mail business. Further, the transformation initiatives and constant introduction of new products have boosted the performance of its North America Small & Medium Business Solutions and Production Mail.

Moreover, the Global Ecommerce business continues to be one of the strongest growth drivers of the company. In less than five years, Global Ecommerce has grown from $20 million business to a worth of over $400 million. Going forward, the company anticipates this segment’s growth rate to accelerate, in light of expansion in overall retail volumes and customer wins. Further, the company expects the Commerce Cloud platform to act as the foundation for all its products and solutions, enhancing digital capabilities and web-based solutions, consequently acting as a decisive factor influencing growth going forward.

Further, the company’s ardent lookout for strategic acquisitions, like building channel partnerships with systems integrators and other technology companies, is likely to strengthen competitive position in the software business. This apart, the company’s prolonged effort to enhance and optimize new enterprise business platform is also anticipated to prove conducive to profitability for the quarter under review.

Despite these positives, the company’s major earnings driver — the Small and Medium Business Solutions (“SMB”) business — has witnessed a decline in revenues. For instance, during third-quarter, SMB Solutions revenues dipped 7.4% year over year. The tepid performance can primarily be attributed to prolonged softness in the North American Mailing business as well as International Mailing Business. These factors could be a drag on segment margin and is likely to put pressure on the overall top-line performance in the upcoming quarter as well.

Moreover, the company has been experiencing a surge in operating expenses on account of ERP implementation in the United States and higher marketing expenses in relation to aggressive advertising and marketing strategies. The company anticipates marketing expense to be up on a year-over-year basis.

This apart, the company has been experiencing a rise in operating expenses due to ERP implementation in the United States and higher marketing expenses in relation to aggressive advertising and marketing strategies. Till the benefits of ERP materialize, the company is anticipated to incur higher capital expenses that might exert pressure on margins in the upcoming quarter as well. In addition, currency fluctuation hasremained one of the headwinds over the past few quarters, and mightimpact earnings and revenues in the upcoming release as well.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Pitney Bowes in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 36 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Pitney Bowes has a Zacks Rank #3, which increases the predictive power of the ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Kemet Corporation KEM has an Earnings ESP of +2.94% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA Corporation NVDA has an Earnings ESP of +4.71% and a Zacks Rank #2.

Teradyne, Inc. TER has an Earnings ESP of +0.60% and a Zacks Rank #2.

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