What happened
Shares of small-cap postal delivery solutions provider Pitney Bowes (PBI +0.28%) got rocked in Thursday afternoon trading -- down 15.1% as of 1:35 p.m. ET -- after reporting misses on both the top and bottom lines this morning.
Heading into the quarter, analysts had forecast Pitney Bowes would earn $0.04 per share on $898 million in sales. As it turned out, profits were just half that -- $0.02 per share -- and sales "missed" by 3%.
NYSE: PBI
Key Data Points
So what
Wall Street was hoping Pitney Bowes could at least eke out a "flat" quarter relative to last year, but Pitney Bowes' sales slid 3% instead, to $871 million. Earnings -- both according to generally accepted accounting principles (GAAP) and pro forma -- simply collapsed, down 82% year over year to the aforementioned $0.02. Free cash flow evaporated, with $6 million in real cash profit coming in 93% below second-quarter 2021 levels.
Among Pitney Bowes' three major business divisions, the second largest and most profitable -- SendTech Solutions -- saw sales slide 2% and profits decline 11%. Pitney Bowes' biggest division by revenue, Global Ecommerce, suffered a 6% decline in revenue as cross-border shipments dried up and higher margins on domestic shipments weren't enough to offset a decline in volume, resulting in losses more than doubling.
The company's small Presort Services division was the only one to grow its revenues last quarter -- and there, profits still declined by 20%.
Now what
Factoring these disappointing results into its projections, alongside a revenue reduction from its sale of its Borderfree business and general "uncertain macroeconomic conditions," Pitney Bowes revised its guidance for the rest of this year. Management now warns that full-year revenue will be roughly flat, somewhere between a "low-single digit percentage decline" and a "low single digit percentage increase."
Operating profits will suffer a mid-to-high single-digit decline, probably resulting in a loss for the year. If it happens, it will be Pitney Bowes' third straight annual loss. Although management tried to soften the blow by promising "solid" but "lower ... than prior year" free cash flow, investors still are understandably less than thrilled with the news.
Even at a not-expensive-seeming 14 times earnings, Pitney Bowes stock simply doesn't have a lot going for it at the moment. Until that changes, I wouldn't expect much of a bounceback from today's sell-off anytime soon.
