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A month has gone by since the last earnings report for Pitney Bowes (PBI). Shares have lost about 19.3% 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 Q3 Earnings Top Estimates, Revenues Up Y/Y
Pitney Bowes Inc. reported third-quarter 2020 adjusted earnings of 8 cents per share, beating the Zacks Consensus Estimate by 60%. However, the bottom line declined 66.7% year over year.
Notably, total revenues improved 13% year over year to $891.9 million. Adjusting for foreign currency exchange, revenues increased 13% year over year to $889.4 million. Management is optimistic on investments in shipping starting to pay off. Notably, Shipping-related revenues represented 50% of total revenues in the reported quarter.
Quarter in Detail
Commerce Services increased 31% (up 31% after adjusted for currency) from the year-ago quarter’s figure to $537.7 million. Global Ecommerce revenues rose 47% to almost $410 million, while Presort Services of $127.7 million declined 3% year over year.
Global Ecommerce revenues benefited from strong growth in Domestic Parcel, Digital Delivery and Cross Border Services volumes. Notably, Global Ecommerce Domestic Parcel volumes more than doubled from prior year.
Presort Services revenues declined due to sluggishness in Marketing Mail and First Class volumes. Markedly, Presort Services productivity measures resulted in 115,000 fewer labor hours to sort nearly 4.1 billion pieces.
However, Marketing Mail Flats and Bound Printed Matter volumes grew at a double-digit rate on a year-over-year basis and limited the decline.
Sending Technology Solutions declined 7% year over year (down 7% after adjusted for currency) to $354.2 million. The downside was due to COVID-19 induced sluggishness in equipment sales, support services, supplies and financing.
However, higher business service revenues, driven by increased usage of shipping offerings and capabilities, limited the decline. In fact, SendTech shipping revenues were $32 million, growing at a double-digit rate. Moreover, SendTech shipped nearly 12,000 units of the SendPro Mailstation since its launch in April.
Adjusted EBITDA Details
In the third quarter, adjusted EBITDA declined 15.2% from the year-ago quarter’s figure to $92.5 million.
Segment EBITDA fell 13% from the year-ago quarter’s figure to $140.1 million. Segment EBIT slumped 15% from the year-ago quarter’s figure to $107.3 million.
Balance Sheet & Cash Flow
As of Sep 30, 2020, cash and cash equivalents and short-term investments were $820.4 million compared with $1.02 billion as of Jun 30, 2020.
As of Sep 30, 2020, long-term debt (including current portion) was almost $2.6 billion, compared with $2.72 billion as of Jun 30, 2020. The company repaid the $100 million drawn against the revolving credit facility in the third quarter.
Cash flow generated was $103.8 million compared with $153.1 million of net cash generated in operations in the previous quarter. Free cash flow was $84.6 million compared with free cash flow of $148.4 million in the prior quarter.
In the reported quarter, Pitney Bowes paid out dividends worth $9 million. The company incurred expenses of $5 million under restructuring payments and capital expenditures worth $21 million in the reported quarter.
The company refrained from providing guidance for 2020 due to uncertainties related to the COVID-19 outbreak and its negative impact on consumer demand and supply chains.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 42.86% due to these changes.
Currently, Pitney Bowes has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. 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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