Pitney Bowes (NYSE: PBI) has agreed to liquidate much of its money-losing e-commerce business with the help of Hilco Global. Investors are cheering the news, sending Pitney Bowes shares up as much as 35% at the open and up 14% as of 11:30 a.m. ET.
A big step toward a turnaround
Shares of shipping company Pitney Bowes have lost about half their value since the beginning of 2021, with the company weighed down by some poor decisions and investments in its global e-commerce (GEC) segment.
In May, Pitney Bowes announced plans to cut upward of $100 million in annual costs as part of a broader push to overhaul the business. It also named board member Lance Rosenzweig as interim CEO with a mandate to stabilize operations and find a solution for GEC.
On Thursday after markets closed, investors got a positive update on that push. Pitney Bowes has agreed to sell a controlling stake in GEC to Hilco, which will sell it off piecemeal. As part of the deal, GEC filed for Chapter 11 bankruptcy and Pitney agreed to provide a $45 million loan.
Rosenzweig said in a statement the move follows through on his pledge to act quickly to shed GEC, which lost $136 million last year.
"We are pleased to have delivered on that commitment by concluding a productive review and identifying an exit path for GEC that provides for an orderly and efficient wind-down of the business, which will ultimately maximize value for Pitney Bowes shareholders," the intern CEO said. "This path also gives us a clear runway to streamline the company and increase profitability across our core, cash-generating businesses."
Is Pitney Bowes a buy?
This is still very much a work in progress, but Pitney Bowes seems to be moving rapidly in the right direction. The company said it expects to generate earnings before interest and taxes of $340 million to $355 million in 2024, boosted by GEC being off the books as well as from cost-saving initiatives and a strong first-half performance.
The stock is still well off of its highs from just a few years ago, and after years of disappointment there is likely plenty of room for multiples to improve should Rosenzweig and his team continue to execute on the plan.
Even after the jump, Pitney Bowes is an intriguing investment right now.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
