While sharing its third-quarter earnings a couple of weeks ago, Stamps.com also slipped in some unexpected news. The El Segundo postage seller revealed that its previously announced deal to acquire competitor Endicia, a subsidiary of Atlanta’s Newell Rubbermaid Inc., had overcome regulatory scrutiny and should close by the end of this month.
That news, along with solid quarterly financial results and increased customer use, sent Stamps.com’s shares skyrocketing 32 percent to $99.60, making it the biggest gainer on last week’s LABJ Stock Index.
“Endicia represents a significant strategic investment in the high-volume shipping area, and we are very excited to move forward with this acquisition,” said Stamps.com Chief Executive Kenneth McBride in a statement.
In a conference call, McBride also highlighted a slew of quarterly records for his firm. Those include revenue climbing 37 percent year over year to $51.7 million, total paying customers rising 12 percent in that same period to 559,000 and average revenue from each user growing 22 percent year over year to $29.05.
Net income of $7.27 million (42 cents a share) did not meet analysts’ expectations of 50 cents a share, though Stamps.com’s adjusted earnings of $20 million ($1.14 a share), did best estimates of 89 cents. The firm’s adjusted income removed stock-based compensation, income tax and other expenses from the total.
Some analysts focused on all the shopping Stamps.com has been doing over the past 18 months.
George Sutton, a senior research analyst at investment banking firm Craig-Hallum Capital Group in Minneapolis, wrote in a research note that Stamps.com’s acquisitions of shipping fulfillment software companies ShipStation and ShipWorks, along with effective marketing spending, have boosted its stock price. And with the Endicia deal set to increase the company’s assets by the end of the year, Sutton has raised his target price from $87 to $100 – which the company hit the day after its earnings release.
“We continue to watch with some fascination how well this story has come together,” Sutton wrote.
Operating expenses came in higher than the analyst had expected due to a 24 percent increase in spending on new business, but Sutton felt heartened overall.
“It is clear to us that the combination of (Stamps.com and Endicia) positions the company as a defined leader in the postal services market with a large, lowly penetrated online market to attack,” he wrote.