Pitney Bowes Inc. (PBI) reported third-quarter 2014 adjusted earnings per share from continuing operations of 51 cents, which beat the Zacks Consensus Estimate of 46 cents by 10.9%. Quarterly earnings were also up 8.5% year over year.
Profits during the quarter were driven by strength in the Digital Commerce Solution and mailing businesses.
Total Revenue
Total revenue for the quarter was $941.6 million, up 2.3% from year over year. The top line primarily benefited from the strong performance of the Digital Commerce Solutions segment, largely offset by weakness in Small and Medium Business (SMB) Solutions. Meanwhile, the Enterprise Business Solutions segment reported marginal growth of 2% in the third quarter.
Segment Performance
The Small and Medium Business Solutions segment revenues declined 5% year over year to $496 million. The decline can be attributed to a 5% year-over-year dip in North American Mailing revenues, which stood at $363 million. Revenues in the International Mailing segment also contracted 6% year over year to $132 million.
In the North American Mailing business, the equipment sales were down although the revenue streams seemed to be stabilizing. The International Mailing business was impacted by various actions related to the International Mailing go-to-market strategy.
Enterprise Business Solutions segment revenues inched up 2% year over year to $225.0 million. Though the segment's Presort Services revenues increased 6% year over year to $111 million, there was a 3% year-over-year decline at the company's Worldwide Production Mail business to $113 million.
On the other hand, Pitney Bowes' Presort Services revenues benefited from improved qualification of mail for presort discounts, especially in the processing of First Class mail. The Worldwide Production mail was impacted by a weaker geographical performance.
The Digital Commerce Solutions segment reported revenues of $221 million, reflecting a substantial 26% year-over-year increase. Revenues primarily benefited from strong performance in each of the four business categories within the segment.
Expenses
Pitney Bowes' selling, general and administrative (SG&A) expenses decreased to $341.7 million from $352.3 million in the year-ago quarter. Research and Development (R&D) expenses rose to $26.1 million from $24.8 million in the prior-year quarter. Income from continuing operations was $141.5 million in the quarter, compared with $87.6 million in the prior-year quarter. Notably, the company expended $4.5 million on restructuring activities in the third quarter.
Other Financial Details
Exiting the quarter, the company's cash and cash equivalents totaled $923.7 billion, up from $907.8 million as of Dec 31, 2013. However, long-term debt decreased to $2.96 billion as of Sep 30, 2014 from $3.3 billion as of Dec 31, 2013. Shareholders' equity was $278.3 million compared with the prior-year figure of $205.2 million. Meanwhile, free cash flow for the quarter stood at $118 million. The company disbursed $38 million for dividends.
Outlook
Concurrent with the earnings release, Pitney Bowes raised its adjusted earnings guidance for fiscal 2014. Also, guidance for revenue and free cash flow were reaffirmed.
For 2014, revenue growth projection has been maintained (excluding the impacts of currency translations) at the 1–3% band.
Pitney Bowes now expects adjusted earnings per share for full-year 2014 in the range of $1.85 to $1.92 per share, compared with the earlier guidance of $1.80–$1.90. The company reiterated its outlook for free cash flow, which is anticipated in the band of $475 million to $575 million.
Zacks Rank
Pitney Bowes currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the office automation and equipment sector include Canon Inc. (CAJ), Carlisle Companies Inc. (CSL) and CLARCOR Inc. (CLC). While Canon and Carlisle sport a Zacks Rank #1 (Strong Buy), CLARCOR carries a Zacks Rank #2 (Buy).
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