Pitney Bowes Inc. PBI delivered fourth-quarter 2017 adjusted earnings of 40 cents per share, which beat the Zacks Consensus Estimate of 36 cents by 11.1%. However, adjusted earnings declined 24.5% on a year-over-year basis.
For full-year 2017, the company’s adjusted earnings per share fell 16.1% to $1.41 compared with the year-ago tally. Notably, the company’s adjusted earnings came within the guided range of $1.38-$1.46 per share.
On a GAAP basis, the company reported earnings per share of 48 cents, compared with the year-ago net loss of 45 cents.
Inside the Headlines
Total revenues in the quarter were $1,049.1 million, up 18.3% year over year on a reported basis. Additionally, revenues were up 16.6%, when adjusted for the impact of currency impact.
For full-year 2017, the company’s sales totaled $3.5 billion, an increase of 4.2% both on a reported as well as adjusted for both the impact of currency and market exits basis, compared with 2016.
Pitney Bowes Inc. Price, Consensus and EPS Surprise
Pitney Bowes Inc. Price, Consensus and EPS Surprise | Pitney Bowes Inc. Quote
As for the segments, on a reported basis, Small and Medium Business (“SMB”) Solutions revenues dipped 5% year over year to $ 441.4 million. The tepid performance was due to softness in the North American Mailing business (down 6%). Decline in recurring revenue streams, partially mitigated by solid performance of the new SendPro C-Series product proved to be a drag on the North American Mailing business. In addition, lower equipment sales had an adverse impact on the International Mailing Business.
Enterprise Business Solutions (“EBS”) revenues increased 9.9% year over year to $255.9 million. Decent performance form Presort Services (up 8%) and the Enterprise business (up 10%) drove top-line growth of this segment. Higher equipment sales driven by higher print and sorter equipment placements bolstered performance of the production mail business.
Digital Commerce Solutionsreported a whopping 86% year-over-year growth in sales to $351.6 million, on the back of strong Global e-commerce (up 169%). Impressive performance in both cross border retail and marketplace volumes along with domestic shipping acted as tailwinds for the Global e-commerce business.Notably, revenues in the Global e-commerce business included revenues from Newgistics. However, soft performance from the Software Solutions business(down 3%)due tolower license and service revenues partially offset top-line growth of this segment.
Liquidity and Cash Flow
Exiting the quarter on Dec 31, 2017, free cash flow was $145.5 million compared with $164.2 million as of Dec 31, 2016.
As of Dec 31, 2017, the company’s cash and cash equivalents totaled $1,009 million compared with $764.5 million at the end of Dec 31, 2016. Long-term debt as of Dec 31, 2017, was $3,559.3 million, up from $2,750.4 million as of Dec 31, 2016.
Guidance
The company provided guidance for full-year 2018. It expects earnings per share to lie in the range of $1.40-$1.55. Revenues, on a reported basis, are expected to grow in the range of 9-13% year over year.
On a positive note, Pitney Bowes believes that new products and digital capabilities of SMB, expansion of the Presort Services network and robust e-commerce volume growth will act as major catalysts, stoking top-line growth for full-year 2018. Moreover, the company’s focus on operational excellence will help it trim costs and expenses, consequently supplementing growth.
Our Take
Pitney Bowes’ concerted efforts to transform its business have started to yield results as is evident from growth across most business lines. The transformation initiatives and introduction of new products have boosted performance. Moreover, the company continues to enhance and optimize new enterprise business platform to boost profitability which bodes well, going forward.
Further, the Global Ecommerce business continues to be one of the strongest catalysts of the company. In less than five years, Global Ecommerce has grown from $20 million business to a worth of over $400 million. This apart, Pitney Bowes expects service performance to improve in the second half of the year driven by revenue growth and cost reduction measures.
However, continued softness in the mailing business is likely to affect Pitney Bowes’ growth momentum, going forward. This apart, as the company continues to transform portfolio and make investments to boost up sales, it expects pressure on margins on account in the short term.
Pitney Bowes currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks worth considering in the same space include ASML Holding N.V. ASML, Arista Networks, Inc. ANET and Applied Materials, Inc. AMAT. While ASML Holding sports a Zacks Rank #1 (Strong Buy), Arista Networks and Applied Materials carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ASML Holding has an excellent earnings surprise history, surpassing estimates in the trailing four quarters with an average beat of 18.8%.
Arista Networks has an excellent earnings surprise history, exceeding estimates in the trailing four quarters with an average beat of 27.5%.
Applied Materials has posted earning beat in the trailing four quarters. It boasts an average beat of 2.8%.
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