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Pitney Bowes Upgraded to Outperform

Zacks Equity Research

On Feb 10, 2014, we upgraded our recommendation on Pitney Bowes Inc. (PBI) to Outperform from Neutral based on its favorable prospects and outlook for the upcoming years. This company reported strong fourth-quarter results and currently sports a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Pitney Bowes has delivered positive earnings surprise in three of the last four quarters, with an average beat of 19.5%. In the last reported quarter, earnings per share came in at 53 cents that well surpassed the Zacks Consensus Estimate.

Excluding the one-time tax benefit, the company’s adjusted earnings were at 49 cents per share. Revenues increased compared with the year-ago number and also surpassed the Zacks Consensus Estimate.

Apart from continued strong earnings results, the future of the company looks promising. The company’s strategic transformation program designed to create long-term flexibility to invest in future growth reinforces our optimism.

Pitney Bowes continues to realize the benefits of its ongoing initiatives to improve its infrastructure, productivity and profitability. Moreover, significant working capital improvements and a diligent operational execution plan positions the company to achieve its aim to reduce its costs by about $100 million to $125 million by 2015. 

Since May 2013, the company is also benefiting from its novel business model, as is evident from the overall revenues and EBIT improvement in the company.

Going forward, Pitney Bowes intends to scale up its investment in the digital commerce business. The segment is performing impressively well, driven by the increased demands for the e-commerce solutions. In the fourth quarter, the company saw growth of 18% in this business while its e-commerce solutions alone grew in double digits on a sequential basis. The company has aligned its priorities to tap the potential of this $40 billion market.

Pitney Bowes also plans to stabilize its mailing business and has taken planned marketing initiatives like the go-to-market strategy for the same. This policy is designed to enhance its software business while improving the customer experience. Moreover, the company is also initiating an Enterprise resource planning (:ERP) system to integrate its back-office operations.

Over the last 30 days, the Zacks Consensus Estimate for 2014 increased 5.7% to $1.84 per share, as all the three analysts had raised their estimates in the period.

Other Stocks to Consider

Some other stocks in the same industry worth considering include Lexmark International Inc. (LXK), Gorman-Rupp Co. (GRC) and Seiko Epson Corp. (SEKEY). All three stocks carry a Zacks Rank #2 (Buy).

Read the Full Research Report on PBI
Read the Full Research Report on SEKEY
Read the Full Research Report on LXK
Read the Full Research Report on GRC

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