On Mar 8, 2013, Zacks Investment Research upgraded Xerox Corporation (XRX) to a Zacks Rank #3 (Hold) from. Zacks Rank #4 (Sell). The upgrade came on the back of the company’s focus on healthcare markets, as well as upward estimate revisions.
Why the Upgrade
Xerox expects to increase revenues from the Services segment to 66% of total revenue by 2017 from the existing level of 55%. To achieve this objective, Xerox is focusing more on vertical markets like healthcare. Xerox recently entered into a $28 million contract with PatientPoint to implement PatientPoint technology to help improve healthcare. Additionally, Xerox Innovation Group announced that a suite of healthcare research projects are conducted in India by Xerox Research Centre India (:XRCI) and Xerox Research Center Webster (:XRCW) in New York that use video cameras and data analytics to monitor a patient's condition.
The company has already begun to reap huge benefits from Medicaid Management Information System (:MMIS) through the successful implementation and CMS (Centers for Medicare and Medicaid Services) Certification in 31 state Medicaid programs. Also, Xerox is looking forward to expand its offerings through inorganic measures to add more clients to its portfolio.
Additionally, a few days back, Xerox-Government and Transportation Sector Technology delivery Center achieved ISO 9001 quality management system certification for superior operational performance and enhanced commitment to customers.
Owing to these positives, the company witnessed a rise in estimate revisions in recent times and possibly made way for the rank upgrade. Over the last 30 days, the Zacks Consensus Estimate moved up by a penny to $1.14 per share for 2014. The long-term earnings growth forecast for the company for the next five years is pegged at 7.70%.
We expect Xerox to perform in line with its peers in the coming months and advice investors to wait for a better entry point before accumulating shares.
Xerox currently has a Zacks Rank #4 (Sell). Other stocks that look promising in the industry and are worth a look include Lexmark International Inc. (LXK) and Pitney Bowes Inc. (PBI), each carrying a Zacks Rank #1 (Strong Buy) and Seiko Epson Corp. (SEKEY), carrying a Zacks Rank #2 (Buy).