A month has gone by since the last earnings report for Pitney Bowes (PBI). Shares have lost about 0.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Pitney Bowes due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Pitney Bowes Q1 Earnings Miss Estimates, Down Y/Y
Pitney Bowes Inc. reported first-quarter 2020 adjusted earnings of 5 cents per share, which declined 64.3% year over year.
The downside was caused by a negative impact of 5 cents due to increase in credit loss provisions to reflect current macro-environment conditions stemming from COVID-19 in connection with the application of the current expected credit losses (CECL) accounting standard on Jan 1, 2020.
Total revenues inched up 0.2% year over year to $796.3 million. Adjusting for foreign currency exchange and market exit impact, revenue growth was 1% year over year.
Quarter in Detail
Commerce Services (54.4% of total revenues) increased 8% (up 8% after adjusted for currency) from the year-ago quarter’s figure to $433 million. Global E-commerce revenues rose 10% to $292 million, while Presort Services of $141 million inched up 4% up 4% year over year.
Global Ecommerce revenues benefited from strong growth in delivery and fulfillment services, offset by COVID-19 induced disruptions. Presort Services revenues improved on the back of increased volumes in First Class Mail. However, decline in marketing mail volumes due to COVID-19 limited growth.
Sending Technology Solutions (45.6% of revenues) declined 8% year over year (down 7% after adjusted for currency) to $363 million. The downside was caused by lower equipment sales and COVID-19 induced supply chain disruptions but was partially offset by higher business service revenue.
In the first quarter, adjusted EBITDA declined 12.7% from the year-ago quarter’s figure to $89.8 million.
Segment EBITDA declined 18% from the year-ago quarter’s figure to $127.7 million. Commerce Services EBITDA declined 49% from the year-ago quarter’s level to $12.1 million. Sending Technology Solutions EBITDA fell 12% year over year to $115.6 million.
Segment EBIT declined 24% from the year-ago quarter’s figure to $92.8 million.
Commerce Services EBIT came in at ($13.8 million) compared with $466K in the year-ago quarter. Global Ecommerce EBIT came in at ($29.5 million) compared with ($14.6 million) in the year-ago quarter, on account of costs associated with the opening of new facilities. However, Presort Services EBIT rose 4% to $15.7 million. Growth was partly offset by unrealized loss from certain investment securities.
Sending Technology Solutions EBIT fell 13% year over year to $106.6 million due to the aforementioned increase in credit loss provisions.
Balance Sheet & Cash Flow
As of Mar 31, 2020, cash and cash equivalents (including short-term investments) were $730.3 million compared with $1.04 billion as of Dec 31, 2019.
Long-term debt (including current portion) was $2.63 billion, down from $2.74 billion reported at the end of the previous quarter.
Net cash used in operations was $66.3 million compared with $69.9 million of cash flow generated in the previous quarter. Free cash outflow came in at $47.4 million compared with free cash flow of $66.5 million in the prior quarter.
In the reported quarter, Pitney Bowes paid out dividends worth $9 million.
On May 4, Pitney Bowes’ board of directors announced a cash dividend of 5 cents per share, payable on Jun 8, to shareholders as on May 22.
The company incurred expenses of $6 million under restructuring payments and capital expenditures worth $26 million in the reported quarter.
The company suspended guidance for 2020 due to uncertainties related to the COVID-19 outbreak as well as its negative impact on consumer demand and supply chains.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -88.24% due to these changes.
At this time, Pitney Bowes has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Pitney Bowes has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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