(PBI) Pitney Bowes Earnings Exceed Consensus Estimates

Pitney Bowes Inc. (PBI) reported fourth quarter 2009 earnings per share from continuing operations of 64 cents per share, exceeding the Zacks Consensus Estimate of 61 cents. Revenue for the quarter was $1.5 billion, a decline of 6% compared with the prior year, while on a constant currency basis revenue declined 9%. For the full year, revenue was $5.6 billion, a decline of 11% when compared with the prior year. Excluding the effect of currency during the year, revenue declined 9%.

Segment Overview

Mailstream Solutions revenue declined 8% in the quarter to $1.0 billion with currency providing 3.6 percentage points of benefit to the change in revenue. Earnings before interest and taxes (EBIT) declined 15% to $268 million compared with the prior year.

U.S. Mailing revenue declined 11% in the quarter to $499 million and EBIT declined 20% to $182 million when compared with the prior year.

International Mailing revenue declined 4% in the quarter to $241 million with currency providing about 10 %age points of benefit to the change in revenue when compared with the prior year. EBIT declined 3% to $41 million.

Worldwide Production Mail revenue declined 10% in the quarter to $160 million, with currency providing about 4 percentage points of benefit to the change in revenue, and EBIT declined 30% to $24 million compared with the prior year.

Software revenue increased 1% in the quarter to $105 million, with currency providing about 6 percentage points of benefit to the change in revenue, and EBIT increased 72% to $21 million compared with the prior year. EBIT margin reached 20% in the quarter, which was nearly double the prior year.

Mailstream Services revenue declined 2% in the quarter to $450 million with currency providing 1.6 percentage points of benefit to the change in revenue and EBIT increased 15% to $48 million compared with the prior year.

Management Services revenue declined 3% in the quarter to $271 million, with currency providing about 2 percentage points of benefit to the change in revenue, and EBIT improved 33 % to $23 million compared with the prior year.

Mail Services revenue increased 2% in the quarter to $145 million and EBIT increased 2% to $19 million compared with the prior year.

Marketing Services revenue declined 3% in the quarter to $33 million and EBIT declined 2% to $6 million compared with the prior year.

Balance Sheet and Cash Flow

Cash and cash equivalents were $426 million with long-term debt at $4.2 billion and shareowners’ equity at 13.6 million. Free cash flow was $223 million for the quarter and $889 million for the year. On a GAAP basis, the company generated $94 million in cash from operations for the quarter and $826 million for the year, which was partially used to reduce debt by $242 million during the year. Free cash flow for the year benefited from lower levels of receivables and inventory as well as reduced capital expenditures.

Looking Ahead

The company expects 2010 revenue to be in a range of flat to 3% growth Incorporatedluding an anticipated 2% benefit from currency translation. Adjusted earnings per share are expected to be in the range of $2.30 to $2.50 for the year. Adjusted earnings per share exclude the expected impact of $100 million to $150 million of pre-tax restructuring charges associated with the company’s previously announced transformation initiatives.

Adjusted earnings per share also excludes an expected non-cash tax charge of approximately 7 cents per diluted share associated with out-of-the-money stock options that expire principally in the first quarter of 2010.

Pitney Bowes Inc. provides mail processing equipment and integrated mail solutions in the United States and internationally. It offers a suite of equipment, supplies, software, and services for end-to-end mailstream solutions, which enable its customers to optimize the flow of physical and electronic mail, documents, and packages across their operations.

We currently have a Neutral recommendation on PBI.

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