Pitney Bowes (PBI) will be announcing Q4 and year-end 2012 results on Thursday, January 31st at 8:00 AM. This will be the first quarter of results for Pitney Bowes since it announced the replacement of its longtime CEO Murray D. Martin with 27-year IBM (IBM) veteran Marc B. Lautenbach on Dec. 3, 2012.
Q4 EPS for Pitney Bowes is estimated to come in at $0.52, a decline of 14% from 2011 levels. Q4 revenue is estimated to come in at $1.29B, a decline of 4% from 2011 levels.
Pitney Bowes share price declined sharply when it last reported earnings on Nov. 1, 2012. In a two week period after earnings, Pitney Bowes saw its shares decline 35%, from $14.65 to $10.75. EPS for Q3 came in 2 cents shy of estimates, at $0.47. Revenues for Pitney Bowes came in 4% less than expected. at $1.2B.
While Q3 results were slightly disappointing, what really spooked investors were the downbeat comments made during the conference call. One particular nugget was that management highlighted the need for Pitney Bowes to exit the $140M-per-year international mail services business to improve profitability.
Another lingering issue for Pitney Bowes is concern over the safety of its dividend. Pitney Bowes has over 30 years, paid out an ever increasing dividend. Pitney Bowes is one of a few companies to achieve over 25 years of consecutive dividend increase. Pitney Bowes currently offers a $0.375 quarterly dividend. At current prices, the stock yields north of 12%. However, please be advised that a yield this high is by definition high-risk.
Pitney Bowes saw its long-term debt downgraded by Moody's on Nov. 15, 2012. However, Pitney Bowes share price was hardly affected by this. Also note, that a five days later, Pitney Bowes was able to issue $75M of 10-year notes at only 5.25%. Pitney Bowes also has a large amount of cash on hand. As of Q3 2012, Pitney Bowes had over $424M in cash and cash equivalents.
Pitney Bowes offers such a high yield for a reason: its main businesses are in secular decline. Mail volumes have been declining for years. However, do not count Pitney Bowes out. The company has made investments to diversify its revenue stream, though these new sources of sales offer much lower profit margins. Also, Pitney Bowes is hardly expensive, with a forward 2013 PE of only 6.
Q4 and full-year 2012 results should provide the new CEO of Pitney Bowes an opportunity to state his case. Will there be a change in the dividend policy? Will Pitney Bowes be jettisoning any business units? Where will Pitney Bowes be investing its significant operating cash flows? These questions and more should be answered during the conference call. A positive announcement might even trigger a short squeeze, since as of 1/15/2013, Pitney Bowes had over 30%, or 59M of its shares shorted.