SaaS shipping firm Pitney Bowes (PBI) announced top and bottom-line beating results for the fourth quarter of 2024. Significant achievements in cost reduction and efficiency improvements have helped the company realize $120 million in annual cost savings by the end of 2024, and it intends to increase these savings to $170-$190 million. Additionally, the company strategically decided to wind down its GEC segment, resulting in enhanced earnings by eliminating losses. The stock is up over 20% on the recent news and over 45% year-to-date. Yet, it still trades at a relative discount, making it a potentially compelling option for value-oriented investors.
Discover the Best Stocks and Maximize Your Portfolio:
- See what stocks are receiving strong buy ratings from top-rated analysts.
- Filter, analyze, and streamline your search for investment opportunities with TipRanks’ Stock Screener.
Cost Rationalization Efforts Bearing Fruit
Pitney Bowes is a technology-centered company known for its shipping and financial solutions. The company focuses on three key segments: Global Ecommerce, Presort Services, and SendTech Solutions. Global Ecommerce is centered around providing domestic retail and e-commerce shipping solutions, such as order fulfillment, returns, and international cross-border e-commerce transactions. Presort Services sort large volumes of first-class mail, marketing mail, and bound and packet mail to access postal work-sharing discounts. SendTech Solutions offers physical and digital mailing and shipping solutions, financing, services, supplies, and other applications that help streamline and reduce costs associated with sending, tracking, and receiving letters and packages.
The company has implemented cost rationalization initiatives, removing roughly $120 million in annualized costs by the end of 2024. Management expects to achieve total net annualized cost savings between $170 million and $190 million, increased from the previously announced target of $150 million to $170 million.
Pitney Bowes has reduced cash held for working capital through various initiatives, including the exit of GEC, enhancing internal cash forecasting, and managing liquidity. The initiatives have freed more than $200 million, which can be used to reduce debt, return capital to shareholders, or invest in organic growth opportunities. While the wind-down process of GEC is expected to cost approximately $165 million, exiting GEC is expected to enhance future earnings by eliminating the losses accrued, which were at $136 million in 2023. A tax asset of $164 million was recorded in 2024, which is anticipated to reduce cash taxes over the coming three years.
The company has further deleveraged its balance sheet by retiring 2028 Notes, rates on Term Loan B have been reduced, and debt covenants are significantly looser. The company plans to remain disciplined in its capital allocation strategy, aiming to reduce its leverage ratio to 3.0x within the next two years.
Increasing Returns to Shareholders
Pitney Bowes has reported results for Q4 and FY2024. For the quarter, revenue of $516 million exceeded expectations by $6.35 million. The adjusted EBIT was $114 million, a 33% increase compared to the prior year. The GAAP EPS posted a loss of $0.21. However, the adjusted EPS was $0.32, a year-over-year improvement of 60% while beating analyst predictions by $0.16.
The company saw revenue of $2.027 billion across the entire year. The adjusted EBIT was $385 million, up by $77 million or 25% from the prior year. GAAP EPS posted a loss of $1.12, with a significant loss from discontinued operations associated with the sale of Global Ecommerce. However, the adjusted EPS was $0.82, showing an improvement of $0.21 or 34% from the previous year.
Pitney Bowes has announced a new share repurchase program of $150 million to increase the capital returned to shareholders. The company also plans to expand its quarterly dividend to $0.06, with potential additional increments being evaluated every quarter.
Shares Show Momentum and Value
The company’s strategic efforts have been rewarded by a rising share price, with the stock up over 162% in the past year. It trades at the high end of its 52-week price range of $3.73 – $9.95 and demonstrates ongoing positive price momentum as it trades above major moving averages. Yet despite this, the shares trade at a relative discount to industry peers, based on its P/S ratio of 0.87x compared to the Industrials sector average of 1.56x.
Bottom Line on Pitney Bowes
Pitney Bowes has demonstrated advancements in cost reduction and efficiency improvements, which have enabled the company to save an impressive $120 million annually, with plans in place to enhance these savings further. The exit from the GEC segment has also played a role in earnings growth. The company’s capacity to adapt, implement cost rationalization initiatives, and pursue additional savings stands out. Strong recent financial results and a disciplined capital allocation strategy that includes a new share repurchase program and increased quarterly dividends point to an ongoing return of value to shareholders. The stock shows promising momentum and still presents a relative value, making Pitney Bowes a compelling option for investors looking for growth with a value focus.
