Summary of several analysts take on PBI (again just stuff I've read don't assume its correct!)
➤ Expectation for revenues to decrease 10.5% in 2009
and then rise 3% in 2010. Product partnerships will expand sales opportunities and extend its
marketing reach into Asia.
➤ On December 15, the company announced a cut of
up to 10% of the workforce. Pitney Bowes also said it expects to record pretax charges of $100 million to $150 million in 2010 as a result of a restructuring program, including previously announced plans to cut up to 10 percent of its staff. Excluding those charges, Pitney Bowes forecast a 2010 adjusted profit of $2.30 to $2.50 per share. Thus excluding restructuring charges, expect op-
erating margins to narrow in 2009, but widen in
2010 as cost savings from restructurings are
more fully realized. The company has been paying down debt in recent quarters.
➤ PBI has a large recurring revenue stream and a
leadership position within its market. Despite projected weak demand
for office equipment to limit near-term sales potential, expect synergies from acquisitions,
and from new product introductions focusing
on digital technology, to aid future growth. Re-structurings should aid margins. Share price
declines since September 2008 have helped lift
the dividend yield to above 6%, which is over
twice the yield for Industrial Sector peers.
➤ Risks include increased competition in the document
management outsourcing market. Postal regulatory changes in key countries are also a risk
factor. Currency fluctuations may affect earnings reported in dollars.
➤ 12-month target price of $29 is based mainly on P/E analysis. Apply a target P/E
multiple of 12X, a discount to Industrials Sector
peers in the S&P 500 Index and toward the low
end of a historical range for PBI to reflect near-term revenue weakness, to the 2010
operating EPS estimate of $2.45.
Some of that is verbatim but what sticks out in my mind is that both the company and analysts see earnings of over $2.30 per share. In my mind that means the dividend and its juicy yield are pretty safe. Of course if the stock price loses 7 % over the year then you're back where you started but partnerships in Asia and I think the OVERBLOWN foresight that MAIL IS DEAD (its not although it may be in decline and certainly not a sexy growth biz) mean the stock might be trading at an undervalued price. Let the shorts short. I want to buy it when its cheap and get something for the long term. P/E valuation says there's a slight discount here so I like that. I don't like the debt and $0.37 book value per share. But I am nibbling. Bought at 21 and watching to grab more. (Other dividend yielders I like (but am waiting on the price) MO, ABT, LLY and maybe JNJ. Also I feel like the banks (if you can stomach them) will eventually return to their dividend ways of yore.)
Jan 07, 2010 (SmarTrend(R) Spotlight via COMTEX) -- SmarTrend identified a Downtrend for Pitney Bowes (NYSE:PBI) on November 24, 2009 at $23.58. In approximately 1 month, Pitney Bowes has returned 6% as of today's recent price of $22.16.
Pitney Bowes is currently below its 50-day moving average of $23.79 and below its 200-day moving average of $23.20. Look for these moving averages to decline to confirm the company's downward momentum.
SmarTrend will continue to scan these moving averages and a number of other proprietary indicators for any changes in momentum for shares of Pitney Bowes.
I just put this one on my radar recently. Love the dividend and I like the fact that its a dying business. No competition will be left to eat away margins and you can get away with tiny Maint Capex. In an inflationary scenario, they should have pricing power due to their dominant market share and brand. Here is where their 59x p/b is nice. PBI will not need much capex to maintain earnings. Emerging markets growth should allow them to maintain dividend for a while.
But the debt and Pension Liability are scary. Ill be curious to see how bad pension is in the 09 k. A company like this with legacy pension and shrinking employee base is a bad combo.
If I buy Ill probably wait for technicals to stabilize.
I wouldn't be in this company long term (if at all). Usually what bad companies do to attract investors is to have a high dividend. Don't fall for these shenanigans, look at their balance sheets, and charts. Yes balance sheets and charts show what the company did and not what it will do, but they are good indicators of what the company is about. You also have to consider the fact that PBI is in a dying business. Yes, they tried to branch out by purchasing software companies but it doesn't seem to have help.
You stated that PBI is a dying business. Maybe it is and maybe it isn't but what I do notice is that the mail that arrives in my mail box continues to increase year after year Although it slowed a bit during the financial crisis with less credit card offerings the volume picked up again. With the internet, I avoid a lot of junk mail with a spam blocker and also just deleting emails that are obviously solicitations. Unfortunately, there is no spam blocker for the catalogs and mailings I get everyday at home and in the office. So people may call PBI a dying business, but I think that Direct Mail advertising will continue to be prominent for many years.
PBI is decining in the US but expanding globally. I don't mean to sound unpatriotic but it's not just about the ole USA anymore. May I ask what brings you to this message board if you have no interest in this stock?
Any value the company has is being squandered away quarterly in dividends. This is money it could use to truly perform a "strategic transformation" to ween itself off of mailing revenue. Instead that cash is going into the ether as the company gleefully travels down its fixed path to zero.
Were is the long term revenue coming from? Financing dividends with employee cuts can't last forever. It seems like a bad attempt to prop up the share price with the yield seekers.
I don't think that the company is "using" dividends to prop up the company. Dividend increases are a long term policy. I, for one, would rather receive a growing dividend stream than have management divert the cash into an acquisition that might or might not work out. In any event, with a p/e under 10 and a yield over 6.5%, I believe that the negativity is reflected in the price. Any surprise should be on the upside. Of course, I could be 100% wrong, especially as some very sharp investment managers are on the short side. That's why this debate must be seen in the context of proper portfolio diversification. The debate is what makes markets interesting and, hopefully, rewarding.
Doug Kass said short it in a recent Barron's article. John Rogers of Ariel sold his position. I still like PBI due to: 1.The dividend has been increased for 33 of the last 34 years and now yields 6.4%. I expect another dividend hike this quarter. However,for context, my investment bias is towards building a portfolio with a growing income stream. 2. The company is dominant in its market. However, this market is in secular decline due to the growth of the internet. 3. As a multinational foreign revenues are about 33% of the total. 4. The company is very cost conscious. They recently announced a 10% reduction in the workforce. 5. They are repurchasing stock on a regular basis. 6. While debt is high, 90% of this is issued by the finance subsidiary to support equipment leasing programs. This is customer friendly and assures more even cash flow than a one time sale. 7. PBI has signed distribution agreements for both Japan and, more significantly, China. 8. Cash Flow is about $4.00 per share. I tried to give you an on-the-one-hand and on-the-other-hand analysis. Most economists tap dance like this which once led Harry Truman to declare, "Bring me a one handed economist!" I could be 100% wrong, especially in light of Kass and Rogers analyses. For the "Short Case- Chris Pavese's Highest Conviction Short" see http://seekingalpha.com/article/180434-the-short-case-on-pitney-bowes. Have a prosperous New Year.
I too am trying to build a portfolio with high yielding investments which is what attracted me to PBI. I am getting a little nervous about the receent decline in the share price, however.
My biggest concern with PBI is that I see traditional postal service continuing to decline at a fairly consistent pace as more and more documents (magazines, books, etc.) are delivered electronically. I can't tell you the last time I received a personal letter via traditional (snail) mail. All of my personal communication is through e-mail and texting.
Thank you for your thoughtful and conceise analysis of PBI. It was very helpful.
Per my posting name, I am very focused on yield.
Thank You HRosen for an excellent post. Kass and Rogers should consider your points. I believe you are well informed and your observations are totally accurate. Good fortune to you in this new year!