Pitney Bowes (PBI)
A Quality Cash Flow Machine Hiding in Plain Sight
Investment Overview
Pitney Bowes has quietly finished the heavy lifting of a multi-year turnaround by exiting their money-losing Global Ecommerce business, reducing their cost structure, reshaping the C-suite and Board, and is now letting their two core businesses do what they do best, generate cash. PBI has transitioned from broken story to blocking-and-tackling execution story, with visible catalysts and reduced risks. Managed by a CEO with significant skin in the game, the risk/reward seems favorable at today’s price.
With a market cap of $1.9B and a FCF run rate of $350M, an 18% FCF yield is too cheap for a brand name with sticky customer relationships, a captive bank, and category leadership in U.S. mail presort. However, absent a re-rating, there is an attractive long-term return profile through dividends and aggressive share repurchases.
The Business
I won’t spend a ton of time outlining the business and describing the various segments in great detail as plenty of ink has been spilled regarding what PBI does, and I will likely write a longer, more detailed post in the coming weeks. Instead I’ll provide a general overview and discuss investment takeaways, once again using TenzingMEMO as my personal AI research assistant.
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PBI has two reportable segments, SendTech Solutions and Presort Services.