What's In The Cards For Pitney Bowes (PBI) In Q1 Earnings?

Pitney Bowes Inc. (NYSE:PBI) is slated to release first-quarter 2017 results before the opening bell on May 2.

The company has had a dismal earnings surprise history, having missed estimates each time over the past four quarters, resulting in an average negative surprise of 10.3%. Last quarter, the company posted a negative surprise of 8.6%.

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

Factors to Consider

Pitney Bowes’ first-quarter 2017 results are expected to be hurt by the prolonged weak performance in its software andNorth American Mailing business. Though the company adopted multiple measures to boost profits at the software segment, it has not yet produced tangible results. In addition, an uncertain global economic environment is likely to further affect the production mail and software businesses, marring the company’s top-line performance.

The company believes that weakening market conditions in the technology industry have affected performance of the Software business. Also, the sluggish global economic environment is anticipated to hamper production mail and software businesses in the near term, limiting the company’s growth momentum.

The company’s primary earnings driver — the Small and Medium Business Solutions (“SMB”) business — has witnessed a decline in revenues that dwarfed management expectations. This will put pressure on the overall top line as well.

In addition to this, currency translations have affected the company’s financials over the past few quarters, and are expected to impact earnings and revenues in the upcoming release as well. In fact, currency volatility is proving to be a drag on the e-commerce business, which happens to be the company’s strongest profit churner.

In the last reported quarter, Pitney Bowes slashed its 2017 adjusted earnings per share guidance to $1.70–$1.85 from the previous guided range of $1.80–$1.95. Revenues, on a reported basis, are expected to be in the range of a 2% decline to 1% growth, when compared to 2016.

Further, Pitney Bowes has been experiencing a surge in its operating expenses on account of ERP implementation in the U.S. and higher marketing expenses in relation to aggressive advertising and marketing strategies. This can hurt financials in the near term. However, benefits of ERP materialization are expected to materialize in the to-be-reported quarter, which will provide a boost to profits.

On a positive note, Pitney Bowes believes that new products and digital capabilities of SMB, expansion of the Presort Services network and robust ecommerce volume growth will act as major catalysts, stoking top-line growth for full-year 2017. Moreover, the company’s focus on operational excellence will help it trim cost and expenses, thus supplementing growth.

Meanwhile, the company’s shares have performed dismally in recent times. The stock recorded an average decline of 37.2% over the past year, in stark contrast to the Zacks categorized Office Automation & Equipment industry’s positive return of 5.3%.

Despite these negatives, Pitney Bowes’ steady transformation process over the past three years to create long-term flexibility for investment reinstates hope. In this regard, the company’s decision to exit low-margin countries like Mexico, South Africa and five markets in Asia is likely to help channel the company’s resources into more profitable areas and thus, contribute to earnings growth.

In addition, some of the company’s recently completed acquisitions, including Borderfree e-commerce, Real Time Content and EngageOne Video software solution, are anticipated to contribute to top-line growth in the to-be-reported quarter. Also, the recent buyout of Enroute Systems has fortified the company’s shipping logistics portfolio and is likely to propel growth, moving ahead.

Pitney Bowes formed a couple of strategic alliances with Alpine Consulting and Lighthouse Computer Services. Further, the company introduced its flagship product – SmartLink – in the Canadian market. These steps will help the company gain market traction and bolster revenues.

Pitney Bowes Inc. Price, Consensus and EPS Surprise

Pitney Bowes Inc. Price, Consensus and EPS Surprise | Pitney Bowes Inc. Quote

Earnings Whispers

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

Zacks ESP: Earnings ESP for the company is currently pegged at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 34 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, but the company’s ESP of 0.00% reduces the chances of a positive earnings surprise.

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

Stocks That Warrant a Look

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:

The Chemours Company (NYSE:CC) has an Earnings ESP of +4.08% and a Zacks Rank #1. The company is expected to release earnings around May 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chesapeake Energy Corp. (NYSE:CHK) has an Earnings ESP of +5.26% and a Zacks Rank #3. The company is expected to release earnings around May 4.

CAN Financial Corporation (NYSE:CNA) has an Earnings ESP of +10.13% and a Zacks Rank #3. The company is expected to release earnings around May 1.

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