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Pitney Bowes (PBI) PT, Estimates Cut By Brean Murray After Q1, 'Buy' Maintained

 May 08, 2012 12:38 PM

(By Balaseshan) Brean Murray, Carret & Co. analyst Ananda Baruah lowered his price target on shares of Pitney Bowes Inc. (NYSE:PBI) to $20 from $21, while maintaining "Buy" rating.

After the company's first quarter results, the brokerage reduced its 2Q-2012 EPS estimate to $0.51 from $0.52, its 3Q-2012 estimate to $0.52 from $0.55, its 4Q-2012 estimate to $0.61 from $0.63 and its 2012 estimate to $2.15 from $2.20.

Baruah said the company posted solid margin and EPS for the first quarter although revenue was a bit softer than expected. Ultimately PBI exceeded Street EPS by $0.02 ($0.52 versus $0.50) and maintained calendar 2012 guidance of $2.05 to $2.25 (Street at $2.12 heading into the call). Free cash flow of $211 million exceeded his $149 million estimate, and PBI maintained its 2012 free cash flow guidance of $700 million to $800 million.

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The analyst has PBI on his Focus List heading into the earnings call and the stock should trade up today given a "beat and maintain" - he continues to view the combination of about 10% to 20% stock appreciation PLUS 7% to 8% dividend yield attractive.

That said, Baruah is tweaking down his second half of 2012 EPS with his new 2012 EPS now $2.15 and his price target to $20 from $21 as investors seem to be pressuring the multiple, perhaps until equipment sales begin to show improvement.

Pitney expects to pull forward some investment from second half of 2012 for growth initiatives – will likely offset in second half with cost saves.

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As a result, the analyst also believes there is a chance June quarter EPS is softer than March quarter EPS (he estimate is at $0.51 versus March quarter of $0.52) as PBI is increasing opex to fuel some revenue initiatives it will likely see a benefit from in the second half of 2012.

PBI is expecting softer revenue trends in the first half of2012 before benefiting from the uptake in some initiatives in the second half of 2012 including some pick up in enterprise spending (first half of 2012 sluggish), some ramp from new digital services introduced in the first half of 2012 in Germany and France, and and the introduction of Volly (PBI's digital consumer bill pay offering).

Pitney Bowes is a global provider of software, hardware and services to enable both physical and digital communications and to integrate those physical and digital communications channels. It offers a range of equipment, supplies, software, services and solutions for managing and integrating physical and digital communication channels.

PBI is trading down 8.81% at $15.31 on Tuesday.



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