Why Pitney Bowes Shares Got Slammed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of mail processing equipment and mail solutions provider Pitney Bowes (NYSE: PBI  ) received a stamp of disapproval from shareholders this morning and fell as much as 10% after the company reported its first-quarter results.

So what: It really wasn't as poor a quarter as everyone had expected, but then again, there's not much to look forward to nowadays when the U.S. Postal Service is a large customer of Pitney Bowes. For the quarter, Pitney Bowes' revenue fell slightly to $1.26 billion from the year earlier while EPS came in at $0.52. It was a mixed report where revenue failed to live up to expectations, but its adjusted profit did beat the consensus figure by $0.02. Other than software, all business segments showed a year-over-year decline in revenue. Pitney Bowes also left its full-year forecast unchanged and still expects revenue to be in the plus-or-minus 2% range and EPS to range between $2.05 and $2.25.

Now what: Pitney Bowes has become a total value investors' stock over the past few years. Growth in the mail industry has dried up as communication has switched to a digital platform, making it increasingly hard for Pitney Bowes to grow its business. In response to this weakened growth, the company has turned to hefty dividends to keep its shareholders happy. Now the question has become: Is it really worth suffering through little to no growth to receive just shy of a 10% dividend yield? With the long-term trend pointing away from standard mail, I'm inclined to say no and would opt for a REIT or MLP if I wanted the safety of a yield that large. The days of Pitney as a growth stock are long gone, and so is my interest in the company.

Craving more input? Start by adding Pitney Bowes to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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  • Report this Comment On May 08, 2012, at 6:26 PM, wjodea1 wrote:

    True the struggle with the USPS is a significant drag on PBI. But, there is much more to this company then its mainstay, the meter. If you look just below the service, you'll find a company with expertise in micro payments and customer communication. Both are in growth areas. The transition away from physical mail is not a transition away from customer communication. Its transitioning to new channels, which PBI is positioning to enable in advance of the migration.

    Suffice to say, I disagree with your motley assessment.

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