Pitney Bowes' stock plunges after 3Q letdown
SAN FRANCISCO (AP) — Pitney Bowes Inc.'s stock price plunged to its lowest point since the 1990s as investors reacted to the latest evidence of the mail and shipping equipment company's struggles to adjust to tougher competition and the shift to digital communications channels.
THE SPARK: The company, based in Stamford, Conn., released third-quarter earnings that missed analysts' targets after the stock market closed Thursday. To cope with the challenges facing Pitney Bowes, management said the company will close a service that delivers mail and catalogues outside the U.S. and impose other cost-cutting measures that will trim annual expenses by $45 million to $55 million.
"We believe we are going through a critical period in the history of our company and our industry," Pitney Bowes CEO Murray Martin said in a conference call after the third-quarter results came out.
The company's earnings plunged 56 percent from last year to $76.5 million, or 38 cents per share. Excluding certain accounting charges, Pitney Bowes said it would have earned 47 cents per share, a penny below the average estimate of analysts surveyed by FactSet.
Revenue fell 6 percent to $1.22 billion — about $40 million below analyst projections.
Shutting down the international mail and catalog business will trim Pitney Bowes' annual revenue by about $140 million, according to Michael Monahan, the company's chief financial officer.
Pitney Bowes didn't specify where it intends to cut additional costs or whether there will be layoffs. Monahan said the "organizational and management consolidations" will result in a fourth-quarter charge of $40 million to $60 million.
THE BIG PICTURE: The company has been scrambling to adjust to the decline in U.S. mail brought by increasing reliance on email and private package deliveries. Martin said the economy has remained on shaky ground for longer than management expected.
THE ANALYSIS: Brean Capital analyst Ananda Baruah is keeping his "hold" rating on Pitney Bowes' stock, and still sees some things to like about the company. The current quarterly dividend of 37.5 cents per share works out an annual cash payment of $1.50 per share, an attractive yield of about 12 percent at current prices.
SHARE ACTION: Pitney Bowes shares dropped $1.84, or 12.5 percent, to $12.81 in Friday afternoon trading. Earlier in the session, the shares touched $12.57, a new 52-week low. On a split-adjusted basis, it's the stock's lowest level since 1991, according to FactSet. The shares have traded as high as $20.46 during the past year.