Shares of Pitney Bowes (PBI 6.44%), which provides physical and digital solutions for customers' shipping and mailing needs, fell sharply at the open of trading on Feb. 1, losing as much as 20.5% of its value in the first few minutes of the market day. The big news was the company's fourth-quarter 2021 earnings, released prior to the start of trading, which clearly didn't please investors.
On the top line, Pitney Bowes generated $984 million in sales in the fourth quarter of 2021. That was down 4% from the fourth quarter of 2020 but beat average analyst expectations of roughly $962 million.
In the company's global e-commerce division, where sales were off by 9%, a decrease in domestic volume was partially offset by higher revenue per parcel. In presort services, which witnessed a 16% jump in revenues, higher revenue per piece and an increase in marketing mailing were both net benefits.
In the sendtech-solutions business, a 6% sales decline was driven by lower equipment and financing revenues, partly offset by higher business-services revenue. All in all, it wasn't a great quarter on the top line, but it wasn't exactly terrible, either.
The problem really showed up on the bottom line, where Pitney Bowes reported adjusted fourth-quarter earnings of $0.06 per share. That was down from $0.14 in the prior year and below analyst expectations of $0.11 per share.
The big story was basically that higher labor and transportation costs crimped margins. In other words, inflation is hitting the company hard. This is a hot-button issue for investors lately, and given the fourth-quarter impact, it's not shocking that Wall Street was in a selling mood after the earnings update.
In the news release, Pitney Bowes management noted that 2021 was "another important year in its transformation." That says a lot, given that the company's history is tied to physical mail delivery.
From a big-picture perspective, it's probably best to think of it as a special-situations stock, with management looking to update the business for the digital era. That process is still moving forward, but higher costs are clearly a new headwind that's making the move to modernize just a little more difficult.
Pitney Bowes is probably only appropriate for more aggressive investors. Today's earnings shortfall highlights how uneven corporate makeovers can be at times.