Pitney Bowes Falls Short - Analyst Blog - VanEck ETF Trust VanEck Short Muni ETF (BATS:SMB), Pitney Bowes (NYSE:PBI)

Pitney Bowes Inc (PBI) reported earnings per share from continuing operations of 48 cents in the second quarter of 2010 missing the Zacks Consensus Estimate of 57 cents. Revenues for the quarter came in at $1.3 billion, a decline of 6% year over year.

U.S. revenues declined by 7% compared with the prior year; and non-U.S. revenue decreased by 3%, and was little impacted from currency in the quarter. Non-U.S. operations represented 29% of total revenues.

Segment Results

Small and Medium Business (SMB) Solutions: Uncertain economic environment resulted in an increasing proportion of U. S. Mailing customers extending leases for existing equipment. This resulted in lower revenues from new equipment leases.

International Mailing revenues declined slightly was negatively affected by lower financing and rental revenue due to fewer equipment sales in prior periods. During the quarter, customers opted for lease extensions for existing equipment, especially in the UK and other parts of Europe.

Enterprise Business Solutions:

In Software, revenues were down only slightly in the quarter versus the prior year on a constant currency basis despite continued transition to annuity-based pricing for some solutions.

Worldwide Production Mail: Revenue growth was severely impacted by the installations of inserting systems and related software. Equipment sales revenue declined as customers made fewer capital investments and voiced concerns about business prospects.
Mail Services continues to process increasing volumes of pre-sort mail from existing customers and continues to diversify its mix of mail through growing standard class volumes. Overall volume of processed mail improved from both new and existing customers.

In Management Services, revenues declined in the quarter as a result of account closures and reductions in the U.S. over the prior year. Outside the U.S., where revenues are driven by print and customer communication services to enterprise accounts in Europe, revenue declined on reduced volumes.

Cash Flow

Free cash flow for the quarter was $157 million, net of $70 million of tax payments. Free cash flow improved due to lower capital expenditures and lower finance receivables. During the quarter the company paid $80 million cash for dividends.

Outlook

Adjusted EPS from continuing operations for the year 2010 is expected to be in the range of $2.10 to $2.30. The company expects to generate free cash flow for 2010 in the range of $700 million to $800 million.

The company is a leading supplier of products and services in the large majority of its business segments. Its meter base and continued ability to place and finance meters in key markets is a significant contributor to its current and future revenues and profitability. However, all segments face competition from a number of companies. We believe that its long experience and reputation for product quality, as well as its sales and support service organizations, are important factors in influencing customer choices with respect to its products and services.

Its significant investment in research and development operations differentiates it from competitors. It has many research and development programs that are directed toward developing new products and service offerings. As a result of these efforts, it has been awarded a number of patents with respect to several of its existing and planned products. However, its businesses are not materially dependent on any one patent, any group of related patents, any one license or any group of related licenses.

Pitney Bowes Inc. was incorporated in the state of Delaware on Apr 23, 1920, as the Pitney Bowes Postage Meter Company. Today, Pitney Bowes Inc. is the largest provider of mail processing equipment and integrated mail solutions in the world.

We currently have a Neutral recommendation on Pitney Bowes Inc.

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