Online Postage Provider Delivers Big in Quarter

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Stamps.com Inc. recently reported expectation-beating earnings equal to $1.57 a share in the fourth quarter, up 119 percent from the same time the previous year. Revenue surged 67 percent to $69.9 million.

As a result of the surprising report, its shares soared 28 percent last week to $120.33, making the company the biggest gainer on the LABJ Stock Index. (See page 26.)

The stock surge makes the company’s market cap $1.98 billion – double what it was a year ago.

The El Segundo provider of online postage and shipping software services attributed the gain to recent acquisitions of several shipping fulfillment software companies. 

“This was another exceptional year for Stamps.com, with strong execution on our business goals, including the integration of our 2014 acquisitions of ShipStation and ShipWorks where we began to realize the synergies we expected from those deals,” said Ken McBride, Stamps.com’s chairman and chief executive, in a statement.

All three companies were able to generate more than $4.5 billion in total United States Postal Service postage, which represents 30 percent of all USPS domestic priority mail.

In a conference call, McBride emphasized that recent acquisitions of Endicia, a subsidiary of Newell Rubbermaid Inc. in Atlanta that provides high-volume shipping technologies and services for USPS, propelled the company’s growth.

“We began working on the process of integrating their businesses into ours,” he said.  

Analysts said the acquisitions will strengthen the company’s position in shipping, which is more important now with the rise of e-commerce.

“The combination of the high-volume shipping by Endicia, multicarrier logistics software ShipStation and Stamps have given the company a wide, deep competitive moat and a powerful growth engine to leverage the huge shipping services market,” wrote George Sutton, a senior research analyst at investment banking firm Craig-Hallum Capital Group in Minneapolis, in a report. 

Now with the combination of Endicia and the logistic software businesses, the company has an answer for the vast majority of shipping needs, Sutton said, which vaults the company into a massive market. 

Another factor that spurred growth was an increased number of paying customers, which has reached 633,000, a 21 percent increase from the same time last year.  

Sutton said the number of paying customers has grown naturally, rather than expanding with new acquisitions. 

“The company has seen a very strong level of organic growth,” Sutton said.

Average monthly revenue per paying customer was $35.35 in the fourth quarter, up 38 percent from the same quarter a year ago.

Given the growth prospects, Sutton has raised his target price on the stock to $150 from $100. 

Even though the stock has soared, it “seems like a steal to us at that price,” he said. “Stamps.com blew away estimates on both the top and bottom line.” 

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