What happened

Shares of Pitney Bowes (NYSE:PBI) stock closed down 10.3% Wednesday after the postal services company reported first-quarter 2018 earnings.

Pitney Bowes reported earning $0.28 per share on a GAAP (generally accepted accounting principles) basis in Q1, and $0.30 adjusted for one-time items, roughly in line with the $0.29 that Wall Street analysts had predicted it would earn. Sales for the quarter came in at $983 million, ahead of consensus estimates of $930.4 million in sales.

But if Pitney Bowes met or exceeded expectations for Q1, then why is its stock down, not up?

Front of a post office

Unlike the United States Postal Service, Pitney Bowes isn't losing money -- but neither is it making much. Image source: Getty Images.

So what

Well, "earnings beat" or no, Q1 wasn't a great quarter for Pitney Bowes. The company grew sales strongly, it's true -- up 18% year over year. However, profits on those sales fell steeply. The $0.28 per share that Pitney earned in Q1 2018 was 20% less than it earned in the year-ago quarter -- despite greater sales.

That all adds up to deeply lower profit margin earned on its revenue last quarter -- and maybe in quarters to come as well.

Now what

Turning its eyes to the future, Pitney Bowes guided investors to expect sales to rise 11% to 15% in 2018. That should work out to sales of between $4.1 billion and about $4.26 billion -- well ahead of the $3.9 billion that analysts had been saying the company was likely to produce this year. Unfortunately, Pitney said its "adjusted profits" will only range between $1.15 and $1.30 per share, versus analyst hopes for $1.45.

That right there, I expect, is the main reason investors sold off the stock today: Pitney Bowes warned on profits, and investors took that warning to heart.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.