PBI Pitney Bowes Inc

Pitney Bowes Inc. (PBI) reported first-quarter 2012 earnings per share from continuing operations of 63 cents, above the Zacks Consensus Estimateof 50 cents and prior-year earnings of 43 cents. Excluding net tax benefit of 11 cents as a result of resolution of additional tax matters with the IRS, adjusted earnings per share from continuing operations came in at 52 cents.

Total Revenue

Total revenue came in at $1.26 billion, down 5% y/y, as a result of a fall in SMB sales and weakness in Production Mail and Management Services segments. Moreover, foreign currency led to a drop in total revenue by 1%. The top line benefited from an improvement in Software and Mail Services segments.  

The company reported a revenue increase in all its segments. 

Segment Performance

Small and Medium Business (SMB) Solutions segment sales declined 7% year over year on a constant currency basis to $629 million, as a result of a 9% fall in North America Mailing revenue, partially offset by a 1% increase in International Mailing revenue.      

Enterprise Business Solutions segment sales inched down 2% year over year to $626 million, due to a 12% decline in revenue from Worldwide Production Mail, and 4% decline in Management Services. The negative effect was partially offset by a 5% increase in Software, 4% in Mail Services and 1% in Marketing Services revenue.

Income

Pitney Bowes incurred total SG&A expense of approximately $411.2 million in the quarter versus approximately $426.6 million in the first quarter of 2011. R&D expense was $34.1 million versus $34.8 million in the year-ago quarter. The company’s income from continuing operations was $143.9 million compared with $92.8 million in the prior-year period.

Balance Sheet

Cash and cash equivalents were $915.6 million with long-term debt of $3.7 billion and shareholder’s deficit of $91 million at the end of the quarter.

Free cash flow in the quarter was $211 million and generated $96 million from cash flow from operations.

Outlook

The company updated its 2012 guidance to account for the benefits from sale of leveraged lease assets in Canada. GAAP earnings from continuing operation is expected to be in the range of $2.22 to $2.42, 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 is expected to be in the to be in the range of $2.05 to $2.25. Revenue growth, excluding the impact of currency, is expected to be in the range of 2% growth to a decline of 2% compared to 2011. 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 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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