Why Is Pitney Bowes (PBI) Down 17.4% Since Last Earnings Report?

A month has gone by since the last earnings report for Pitney Bowes (PBI). Shares have lost about 17.4% 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 Q4 Earnings Beat Estimates, Revenues Down Y/Y

Pitney Bowes Inc (NYSE:PBI). reported fourth-quarter 2019 adjusted earnings of 14 cents per share beating the Zacks Consensus Estimate by 27.3%. However, the figure declined 54.8% year over year.

Total revenues declined 3% year over year to $831.3 million. Adjusting for foreign currency exchange impact of approximately $1 million, revenues of $832.4 million were down 3% year over year.

Notably, Pitney Bowes has divested SMB businesses based across six European countries — Sweden, Denmark, Norway, Finland, Italy and Switzerland — to BAVARIA Industries Group AG in a bid to enhance go-to-market strategy. This limited revenue growth by $2.1 million. Considering impact from currency and market exit, revenues (at cc) declined 2% year over year to $830.3 million.

Quarter in Detail

Commerce Services (55.2% of total revenues) improved 5% from the year-ago quarter (up 5% after adjusted for currency) to $459.1 million. Global Ecommerce revenues improved 6% to $323.9 million, while Presort Services of $135.1 million inched up 1% year over year.

Global Ecommerce revenues benefited from strong performance of parcel platforms. Presort Services revenues improved on the back of increased volumes across all mail classes. However, impact from ransomware attack on Oct 12, 2019, limited growth.

Sending Technology Solutions (44.8% of revenues) declined 11% year over year (down 11% after adjusted for currency) to $372.3 million. Revenues declined 9% when adjusted for both currency and exits from select Europe-based markets.

Impact from ransomware attack, lower revenues from equipment, support services and financing weighed on the segmental performance. Nonetheless, higher rentals and improvement in business services limited the decline.

Operating Details

In the fourth quarter, adjusted EBITDA declined 29.7% from the year-ago quarter to $105.9 million.

Segment EBITDA decreased 20.4% from the year-ago quarter to $151.4 million. Commerce Services EBITDA declined 16% from the year-ago quarter to $30.2 million. Sending Technology Solutions EBITDA fell 21% year over year to $121.6 million.

Segment EBIT declined 26.7% from the year-ago quarter to $116.5 million.

Commerce Services EBIT came in at $4.3 million, down 65% year over year. Global Ecommerce EBIT came in at ($18.2 million) compared with ($4.3 million) in the year-ago quarter, on account of lower fulfillment margins and higher investments. However, Presort Services EBIT surged 34% to $22.5 million on the back of lower transportation and labor costs, which offset impact from ransomware and client mix that led to lower revenue per piece.

Sending Technology Solutions EBIT fell 23% year over year to $112.2 million on costs pertaining to higher tariffs and ransomware attack.

Balance Sheet & Cash Flow

As of Dec 31, 2019, cash and cash equivalents (including short term investments) were $1.04 billion compared with $651.9 million as of Sep 30, 2019.

Long-term debt (including current portion) was $2.74 billion, down from $3.07 billion reported at the end of previous quarter.

Net cash from operations was $69.9 million compared with $95.5 million in the previous quarter. Free cash flow came in at $66.5 million compared with $69.3 million in the prior quarter.

In the reported quarter, Pitney Bowes paid out dividends worth $9 million.

The company incurred expenses of $8 million under restructuring payments and capital expenditures worth $42 million in the reported quarter.

Guidance

For 2020, Pitney Bowes projects revenues (cc basis) to be in the range of 1.5% decline to 1% growth over 2019 tally. Adjusted earnings are anticipated between 60 cents and 70 cents per share.

Free cash flow is anticipated between $140 million and $170 million.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.