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Pitney Bowes (PBI) Q1 Earnings Miss Estimates, Down Y/Y

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Zacks Equity Research
·5 min read
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Pitney Bowes Inc. PBI reported first-quarter 2020 adjusted earnings of 5 cents per share, which missed the Zacks Consensus Estimate by 58.3%. Moreover, the figure 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.

Notably, the company’s shares have declined 26.5% in the year-to-date period compared with the industry’s fall of 26.7%.

Pitney Bowes Inc. Price, Consensus and EPS Surprise

 

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

Pitney Bowes Inc. price-consensus-eps-surprise-chart | Pitney Bowes Inc. Quote

 

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.

Operating Details

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.

Guidance

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.

Zacks Rank & Stocks to Consider

Currently, Skyworks carries a Zacks Rank #3 (Hold).

Netlist, Inc. NLST, Pixelworks, Inc. PXLW and InterDigital, Inc. IDCC are some better-ranked stocks worth considering in the broader computer and technology sector, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Netlist and InterDigital is pegged at 15% each, while Pixelworks is pegged at 20%.

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