Xerox (XRX) Downgraded to Sell on Weak Fundamentals
On Aug 18, 2015, Zacks Investment Research downgraded Xerox Corporation XRX to a Zacks Rank #4 (Sell) from a Zacks Rank #3 (Hold) primarily due to an unfavorable business environment.
Why the Downgrade
Xerox reported disappointing second-quarter 2015 results as earnings and revenues decreased year over year and adjusted earnings missed the Zacks Consensus Estimate by a penny.
Goss margin of 31.1% was down 100 basis points year over year, driven by lower gross margin from technology products as well as a greater mix of low-margin services products. The availability of a large number of substitutes has also largely affected the profit margins of the company.
Xerox has been also been seeing sustained weakness in its Document Printing business, resulting from a fall in equipment sales and annuity revenues. Also, currency and pension expenses continue to be near-term headwinds for the company. Additionally, the company maintains significant operations and acquires or manufactures many of its products outside the United States. Fluctuations in foreign currency exchange rates affect the company’s net investment in foreign subsidiaries and may cause instability in cash flows related to foreign denominated transactions.
Most of the earnings estimates for the company have been revised downwards in the past 30 days, signifying negative investor confidence. A downgrade in the Zacks Rank serves as one of the triggers to exit certain underperformers at the right time to maximize portfolio returns. Consequently, it seems to be an opportune time to get rid of this stock before more losses hit your portfolio.
Other Stocks to Consider
Other stocks that look promising and are worth a look now include Cardtronics Inc CATM, Core-Mark Holding Company, Inc CORE and Vectrus, Inc VEC, each having a Zacks Rank #2 (Buy).
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XEROX CORP (XRX): Free Stock Analysis Report
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