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Xerox To Reorganize Under Holding Company, Improve Operations

Zacks Equity Research

Xerox Corporation XRX has announced that it will reorganize as a wholly-owned subsidiary of a new holding company.

The company stated in a regulatory filing that the move is aimed at attaining greater strategic, operational as well as financial flexibility and does not involve any change in operations, directors and executive officers.

The reorganization, which is subject to shareholder and regulatory approval along with other customary conditions, is anticipated to be completed in the middle of the year.

Shares of the new holding company will trade under Xerox’s current ticker “XRX” on the New York Stock Exchange.

The move is similar to Google’s reorganization under Alphabet GOOGL in 2015.

Last year Xerox canceled its decision to merge with Fujifilm Holdings due to strong opposition from activist investors Carl Icahn and Darwin Deason.

Shares of the company have gained 53% year to date, substantially outperforming the 34.8% rally of the industry it belongs to.

Our Take

A holding company structure helps to protect patents, reduce tax bill and diversify businesses efficiently. So, the move seems appropriate as Xerox is executing a Strategic Transformation program to achieve productivity and cost reduction. Also, the company has an aggressive product development program in new high growth markets.

Zacks Rank & Other Stocks to Consider

Currently, Xerox carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other top-ranked stocks in the broader Business Services sector are Omnicom OMC and Automatic Data Processing ADP, each carrying a Zacks Rank #2.

Long-term expected earnings per share (three to five years) growth rate for Omnicom and Automatic Data Processing is 6.9% and 12.8%, respectively.

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