Pitney Bowes Inc’s (PBI) third-quarter fiscal 2011 earnings per share of $0.69 was above the Zacks Consensus Estimate of 54 cents and prior-year earnings of $0.55.
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.
Third Quarter Highlights
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%.
Segment wise
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 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.
We have discussed the quarterly results at length here: Pitney Bowes Beats Estimates
Agreement – Estimate Revisions
Estimates for Pitney Bowes reflect mixed reactions from analysts to the third quarter results. Among the analysts covering the stock, 1 analyst has revised its estimated in the last 30 days while 2 of them have lowered their estimates for the following quarter. For full fiscal 2011, 3 analysts have revised their estimates upward in the last 30 days.
Magnitude – Consensus Estimate Trend
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.
Given the weak third quarter, the consensus estimates have lowered by 2 cents to 62 cents in the last 30 days. For full fiscal 2011, the consensus estimates have gone down by 9 cents to $2.30 in the last 30 days.
Our Take
Pitney Bowes Inc. is the largest provider of mail processing equipment and integrated mail solutions in the world. 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 long 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.
A major competitor of Pitney Bowes is Siemens Inc. (SI). We currently maintain our Neutral rating on Pitney Bowes Inc. with a Zacks #3 Rank (short-term Sell recommendation) over the next one-to-three months.
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