Pair of Acquisitions Delivers for Postage Business

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With two new acquisitions in the fold, Stamps.com Inc. recently posted blowout fourth-quarter earnings. And that delivered for the company’s shareholders.

Shares of the El Segundo online postage firm skyrocketed 23 percent during the week ended Feb. 18 to close at $58.67. The company was one of the biggest gainers on the LABJ Stock Index. (See Page 78.)

After markets closed Feb. 11, Stamps.com reported net income of $8.9 million (54 cents a share) for the quarter ended Dec. 31, compared with $18.9 million ($1.13 a share) for the same quarter a year earlier. (The year-ago quarter included a $9.7 million noncash income tax benefit.) Revenue rose 29 percent to $41.9 million. Both income and revenue beat Wall Street estimates.

Stamps.com Chief Executive Kenneth McBride mentioned the firm’s purchases of shipping fulfillment software companies ShipStation in Austin, Texas, and ShipWorks in St. Louis during the second half of 2014 as key contributors to a “transformational” year for the company.

“During the fourth quarter, we made great progress integrating our recent acquisitions, and we accelerated our growth,” McBride said on a Feb. 11 conference call discussing the earnings. “We are excited about our future prospects and look forward to capitalizing on our opportunities in 2015.”

Stamps.com executives declined to comment for this report.

Kevin Liu, an analyst who covers the company for West L.A. investment bank B. Riley & Co., said the two acquisitions made a lot of sense for the online postage provider, and they showed up in the quarterly numbers. Both ShipWorks and ShipStation make software for e-commerce companies and other firms that ship lots of packages.

“They’re definitely complementary, and at the end of the day they’re in a more attractive space,” Liu said. “Rates are higher and customers are stickier.”

Stamps.com’s core business of selling stamps online is inherently reliant on the Postal Service, which has struggled financially in recent years. But the government entity is making a renewed push into higher-margin package shipping, which should only help the business, according to George Sutton, who covers the company for Minneapolis investment bank Craig-Hallum Capital Group.

“Coupled with the increasing value of the Postal Service following material price increases from its competitors, we believe the value proposition for the Stamps.com service continues to increase, and should yield customer adoption as the year progresses,” he wrote in a Feb. 12 research note.