Does Pitney Bowes Have a Fighting Chance?

With shares of Pitney Bowes (NYSE:PBI) trading at around $14.56, is PBI an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

To put it simply, Pitney Bowes is a mess. It’s difficult to find a company where revenue has consistently declined and the stock price has significantly depreciated since 2009. Pitney Bowes has remained profitable, but that has been mostly due to layoffs. The problem is that Pitney Bowes is mostly laying off its knowledgeable workers opposed to managers. As you might have figured, the company culture is poor.

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According to Glassdoor.com, employees have rated their employer a paltry 2.7 of 5, and only 32 percent of employees would recommend the company to a friend. On the surface, it looks as though leadership is good because 80 percent of employees approve of CEO Marc Lautenbach. However, if you look closer, the CEO rating is only based on 15 ratings whereas the company culture numbers are based on 260 employee ratings. This isn’t to say CEO Marc Lautenbach is doing a poor job. Actually, he’s most likely doing everything he can to meet analyst expectations. But at what cost?

Two employee quotes sum up the Pitney Bowes situation well. Both of these employees have been working at the company for more than 10 years. These quotes are:

“Organization in flux. Unfortunate downturn for great company.”

“A long ways from their glory days.”

In addition to layoffs, Pitney Bowes also cut its dividend by 50 percent earlier this year and divested non-core assets. Pitney Bowes still yields 5.20 percent, the profit margin is a respectable 7.30 percent, and operating cash flow is good at $720.97 million. Therefore, Pitney Bowes has a fighting chance. However, an industry decline stacks the odds against the company. Pitney Bowes didn’t react and innovate quickly enough to prevent a downward spiral.

Let’s take a look at some important numbers prior to forming an opinion on this stock.
T = Technicals Are Mixed

Pitney Bowes has performed well year-to-date, but momentum has slowed.

1 Month Year-To-Date 1 Year 3 Year
PBI -3.13% 42.18% 14.33% -17.98%
CAJ -8.33% -16.35% -16.83% -11.64%
RRD 5.80% 53.51% 34.85% -8.32%

At $14.56, Pitney Bowes is trading below its 50-day SMA, but still above its 200-day SMA.

50-Day SMA 14.94
200-Day SMA 13.46
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E = Earnings Have Been Mixed

Earnings have been inconsistent, but at least the company has remained profitable. On the revenue side, the future doesn’t look bright.

Fiscal Year 2008 2009 2010 2011 2012
Revenue ($) in millions 6,262 5,569 5,425 5,278 4,904
Diluted EPS ($) 2.00 2.04 1.41 3.05 2.21

Looking at the last quarter on a year-over-year basis, revenue declined 4.04 percent, and earnings declined 57.50 percent.

Quarter Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012 Mar. 31, 2013
Revenue ($) in millions 1,255.66 1,245.82 1,215.68 1,287.31 1,166.96
Diluted EPS ($) 0.79 0.50 0.38 0.55 0.33

Now let’s take a look at the next page for the Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

Conclusion

Apparently, the majority of analysts like the stock. That’s surprising. The best chance investors have is that Pitney Bowes continues to cut costs so the stock can stay afloat while large dividends are paid out. However, over the long haul, there is no business without growth.

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Pitney Bowes is a STAY AWAY.

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All content posted should not be considered professional advice. Please do your own research and consult with a professional financial advisor before making any investment decisions. I don’t have any positions in this stock.

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