PBI Pitney Bowes Inc

Pitney Bowes Inc. (PBI) released its first-quarter 2011 before the market opened today, reporting earnings per share from continuing operation of 42 cents, underperforming the Zacks Consensus Estimate of 53 cents, but above the prior-year estimate of 38 cents.

Revenue

Total revenue was $1.3 billion in the quarter, a decrease of 2% year over year, led by a decline in supplies, rentals and financing revenues ,partially offset by increased software and equipment sales. Loss caused by outbreak of a fire in Dallas at the company’s largest mail presort center also negatively affected the company’s revenue and earnings. 

SMB Solutions revenue inched down 5% on constant currency basis to $680 million. Within SMB Solutions, North America Mailing revenue was $509 million (down 5%) and International Mailing revenue was $171 million (down 3%).

Enterprise Business Solutions revenue inched down 1% on constant currency basis to $643 million. Within Enterprise Business Solutions, Worldwide Production Mail revenue was $132 million (up 3%), Software revenue was $96 million (up 15%), Management Services revenue was $242 million (down 5%), Mail Services revenue was $$144 million (down 3%) and Marketing Services revenue was $30 million (down 6%).

Income and Expenses

Operating Income was $134.2 million compared with $160.0 million in the prior-year quarter. SG&A expense was $429.9 million compared with $443.3 million and R&D expense was $34.8 million compared with $40.9 million.

Balance Sheet

Cash and cash equivalents was $652.1 million at the end of the quarter compared with $484.4 million at the end of the prior quarter. Long-term debt was $4,236 million compared with $4,239 million.

Free cash flow was $285.8 million for the quarter compared with $289.7 million in the prior-year period. On a GAAP basis, the company generated $296.8 million in cash from operations for the quarter compared with $301.6 million.

The company paid cash dividend of $75 million during the quarter.

Outlook

Pitney Bowes expects total revenue growth to be between flat to 3% range in 2011. Adjusted earnings from continuing operations are expected to be in the range of $2.15 to $2.35.

The company believes it is poised to deliver solid performance in the long term and achieve solid profitability based on its strong product portfolio. Pitney Bowes is benefiting from its Strategic Transformation program, helping it to effectively provide new products and services.

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 vast 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.

However, many of Pitney Bowes contracts are with government entities. Government contracts are subject to extensive and complex government procurement laws and regulations, along with regular audits of contract pricing and business practices.

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 #3 Rank (short-term Hold recommendation) over the next one-to-three months.

 
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