Pitney Bowes (PBI) Beats On Q1 Earnings, Revenues Up Y/Y

Pitney Bowes Inc. (NYSE:PBI) delivered first-quarter 2018 adjusted earnings of 30 cents per share that beat the Zacks Consensus Estimate by a penny but decreased 16.1% year over year.

Revenues increased 17.5% year over year to $983.2 million. Excluding favorable foreign currency exchange impact of $19.5 million, revenues increased 15% to $963.6 million.

On Apr 30, 2018, Pitney Bowes announced that it signed a definitive agreement to divest Production Mail and its supporting software to Platinum Equity for $361 million. The company expects net proceeds of $270 million from the transaction.

Segment Details

Commerce services (38.8% of revenues) surged 72.6% from the year-ago quarter (up 71% after adjusted for currency) to $381 million. While Global Ecommerce revenues soared 179.7% to $246.6 million, Presort Services inched up 1.3% to $134.5 million.

Global Ecommerce revenues benefited from 10% revenue growth in Newgistics driven by strong performance in parcel and fulfilment volumes.

Presort Services revenues increased due to higher revenue per piece along with increased volumes of First Class mail and flats processed.

SMB Business solutions (43.1% of revenues) declined 5.6% year over year (down 8% after adjusted for currency) to $423.3 million. North America Mailing revenues declined 8.5% to $325.4 million. However, this was partially offset by 5.2% increase in International Mailing revenues, which totaled $97.9 million.

Software solutions (8.3% of revenues) increased 4.3% year over year (up 1% after adjusted for currency) to $81.6 million. Production Mail (9.9% of revenues) rose 9.3% (up 6% after adjusted for currency) to $97.2 million.

Operating Details

In the first quarter, segment EBITDA declined 7.1% from the year-ago quarter to $214.2 million. Segment EBITDA margin contracted 580 basis points (bps) on a year-over-year basis to 21.8%.

Commerce services EBITDA dipped 2.6% from the year-ago quarter to $39.9 million. SMB Business solutions EBITDA declined 10.4% year over year to $156.7 million. Software solutions EBITDA soared 50.3% year over year to $7.3 million. Production Mail EBITDA increased 5.4% to $10.3 million.

Segment EBIT declined 12.1% from the year-ago quarter to $169.1 million. Segment EBIT margin contracted 580 bps on a year-over-year basis to 17.2%.

Commerce services EBIT plunged 27% from the year-ago quarter to $19.3 million.

Global Ecommerce reported a loss of $7.7 million wider than a loss of $4.3 million in the year-ago quarter. The loss was primarily attributed to higher investments on market growth opportunities and operational excellence initiatives. Presort Services EBIT declined due to higher labor and transportation costs.

SMB Business solutions EBIT declined 12.3% year over year to $135.4 million.

Software solutions EBIT soared 76.4% year over year to $4.8 million. Production Mail EBIT increased 7.3% to $9.6 million.

Consolidated adjusted EBIT declined 12.7% from the year-ago quarter to $119.8 million. Adjusted EBIT margin contracted 420 bps to 12.2%.

Balance Sheet & Cash Flow

As of Mar 31, 2018, cash and cash equivalents (including short term investments) were $775.5 million as compared with $1.06 billion as of Dec 31, 2017.

Long-term debt was $3.25 billion down from $3.56 billion at the end of previous quarter.

GAAP cash flow from operations was $83 million, while free cash flow was $65 million.

Guidance

For 2018, Pitney Bowes expects revenues (after adjusted for foreign currency) to increase in the range of 11-15% over 2017.

Adjusted earnings are now expected between $1.15 and $1.30 per share.

Free cash flow is now expected between $300 million and $350 million.

Zacks Rank & Stocks to Consider

Pitney Bowes carries a Zacks Rank #4 (Sell).

Etsy (NASDAQ:ETSY) , Autohome (NYSE:ATHM) and Match Group (NASDAQ:MTCH) are stocks worth considering in the broader computer and technology sector. While Etsy carries a Zacks Rank #2 (Buy), both Autohome and Match Group sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Both Autohome and Etsy are set to report their first-quarter 2018 results on May 8. Match Group slated to report first-quarter 2018 results on May 9.

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