Management raises prices and holds them “until further notice.
It’s a post-Christmas miracle for Pitney Bowes (NYSE:PBI) shareholders. In a press release this morning, the postal service provider announced that it will reinstate the higher prices for its standard and cross-border delivery services that were originally implemented during the 2020 peak mailing season, effective January 25, 2021, and will maintain those prices “until further notice. Shareholders responded by sending Pitney Bowes’ stock price up an incredible 18% by 1:00 p.m. EST.
“2020 was a record year for delivery volume,” the company said in its statement, “and we expect the pace of that volume to continue into 2021 and beyond.” And so the company is responding to these “unprecedented parcel volumes and COVID-19-related operating costs that will continue into the new year” by charging higher prices for its services.
What does this mean for shareholders?
Keep in mind that Pitney Bowes’ cost of goods sold rose 20% in the first three quarters of this year compared to this time last year – that’s the higher cost the company is talking about. Granted, the company’s operating costs are down 5% year-over-year. The result, however, is that Pitney Bowes’ operating profit is down 44% year over year, despite all its efforts to cut costs, and Pitney Bowes’ bottom line is a net loss for the current year. Today’s announcement is a good first step to reverse this trend. By charging more for its services, the company will improve its chances of making (or even beating) analysts’ projected 2021 earnings of $0.36 per share. At a current valuation of less than 18 times projected 2021 earnings, Pitney Bowes just became a more attractive candidate for stock buyers.