Pitney Bowes Inc. (PBI): 20% Just Isn’t Enough to Save This Company

A year ago, Pitney Bowes Inc. (NYSE:PBI) suggested that they would generate around $900 million in free cash flow for 2013. A few quarters ago, the company lowered expectations to about $700 million to $800 million. Unfortunately for investors, in the company’s last quarter, this guidance was lowered once again to a range of $600 million to $700 million. While this cash flow would seem to more than cover the company’s now lowered dividend, what if the company’s free cash flow guidance continues to drop?

Speaking of Pitney Bowes Inc. (NYSE:PBI)’ lower cash flow, the company’s payout ratio is still worse than its peers at about 44%. Relative to payout ratios of 19% at Hewlett-Packard Company (NYSE:HPQ), 11.3% at Xerox Corporation (NYSE:XRX), and 32% at Siemens AG (ADR) (NYSE:SI), all of Pitney Bowes’ competition is in better shape.

Comparing Pitney Bowes Inc. (NYSE:PBI)’ balance sheet to their peers, the company carries over $3 billion in net long-term debt compared to at most $175 million in quarterly free cash flow (at $700 million per year). This means Pitney Bowes is carrying debt that is over 17 times their quarterly free cash flow.

By comparison, Siemens AG (ADR) (NYSE:SI) carries $15.75 billion in long-term debt, but generated $1.9 billion in free cash flow last quarter, or a ratio of 8.29. Xerox Corporation (NYSE:XRX) has about $1.9 billion in net long-term debt and generates $540 million in free cash flow, for a ratio of 3.52. The best positioned company is Hewlett-Packard Company (NYSE:HPQ), with not only $1.48 billion in quarterly free cash flow, but also over $3.5 billion in net cash and investments.

The biggest problem facing Pitney Bowes is only 20% of their business is growing. Of their seven divisions, only two showed growth in revenue. Big picture, investors get a negative total return, decreasing cash flow expectations, a huge debt load, and 80% of the business reporting declining revenue. Sorry Pitney Bowes investors, but this may be a company that is beyond saving.

Chad Henage has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article 20% Just Isn’t Enough to Save This Company originally appeared on Fool.com.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.