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Xerox (XRX) Beats Q1 Earnings Estimates, Ups 2019 EPS View

Zacks Equity Research

Xerox Corporation XRX mixed first-quarter 2019 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same.

Adjusted earnings per share of 91 cents beat the consensus mark by 6 cents and increased 23 cents from the year-ago quarter’s tally. Total revenues of $2.21 billion missed the consensus mark by $115 million. The top line fell 9.4% year over year on a reported basis and 7% on a constant-currency (cc) basis.

Shares of Xerox have gained 70.5% year to date, outperforming the 38.1% rise of the industry it belongs to.

Let’s check out the numbers in detail.

Revenues by Segment

Equipment sales totaled $448 million, which declined 10.2% year over year on a reported basis and 7.6% on a constant-currency basis. The segment contributed 20% to total revenues.

Post sale revenues of $1.76 billion declined 9.2% year over year on a reported basis and 6.8% at cc. The segment contributed 80% to total revenues.

Revenues by Region

Revenues from Americas came in at $1.41 billion, down 8.1% year over year on a reported basis and 7.5% at cc. The region contributed 64% to total revenues.

EMEA revenues amounted to $712 million, down 10.4% year over year on a reported basis and 4.3% at cc. The region contributed 32% to total revenues.

Revenues from Other region totaled $84 million, down 20% year over year on a reported basis as well as at cc. The region contributed 4% to total revenues. 

Xerox Corporation Revenue (TTM)


Xerox Corporation Revenue (TTM) | Xerox Corporation Quote


Operating Results

Gross profit of $889 million fell 8.4% from the prior-year quarter’s figure. Total gross margin of 40.3% declined 50 basis points (bps) year over year.

While equipment gross margin surged 310 bps year over year to 35.7%, post sale gross margin contracted 20 bps to 41.5%.

Adjusted operating profit of $249 million was up 2.9% year over year. Adjusted operating margin improved 140 bps year over year to 11.3%.

Selling, administrative and general expenses, as a percentage of revenues, declined to 24.8% from 25.8% in the year-ago quarter. Research, development and engineering expenses, as a percentage of revenues, increased to 4.2% from 4.1% in the prior-year quarter.

Balance Sheet and Cash Flow

Xerox exited the first quarter with cash, cash equivalents and restricted cash balance of $786 billion compared with $1.15 billion at the end of the previous quarter. Long-term debt was $4.27 billion, flat with the prior quarter tally.

The company generated $226 million of cash from operating activities and spent $15 million on capex in the quarter. Free cash flow was $211 million.

2019 Guidance

Xerox raised its 2019 adjusted EPS guidance. It now expects adjusted EPS in the range of $3.80 to $3.95 compared with the previous expectation of $3.70 to $3. 80. The Zacks Consensus Estimate is pegged at $3.76.

Revenues are expected to decline roughly 5% at cc. The company expects operating cash flow in the range of $1.15-$1.25 billion and free cash flow in the range of $1.0-$1.1 billion. Adjusted operating margin is anticipated between 12.6% and 13.1%.

Zacks Rank & Upcoming Releases

Currently, Xerox carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Zacks Business Services sector are awaiting first-quarter 2019 earnings reports of key players like Avis Budget CAR, Clean Harbors CLH and IQVIA Holdings IQV. All of them are slated to report on May 1.

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