Xerox Corporation XRX reported mixed second-quarter 2017 results with adjusted earnings of 87 cents per share, which beat the Zacks Consensus Estimate of 84 cents.
Total revenue for the quarter was $2,567 million compared with $2,793 million in the year-earlier quarter. The decline was due to negative impact from currency.
Post the separation of its BPO business, the company realigned operations to better manage its business and serve customers. In 2017, the company intends to focus on geographic expansion and is mainly organized from a sales perspective on the basis of “go-to-market” sales channels. These sales channels will help serve customers a wide range of products and services. As a result of this transition and change in structure, the company currently operates as one reportable segment, the design, development and sale of document management systems and solutions.
Reverse Stock Split
As a result of the spin-off of the company's business process outsourcing business, now known as Conduent Incorporated CNDT, Xerox's market capitalization was divided. Based on that, the company proposed a reverse stock split to increase the per share trading price of Xerox common stock, improve its liquidity and facilitate trading. On May 23, 2017, the Board of Directors authorized reverse stock split of Xerox’s shares at a ratio of one-for-four shares, together with the proportionate reduction in the authorized shares of its common stock from 1,750,000,000 shares to 437,500,000 shares. Accordingly, management reclassified $760 million from common stock to additional paid-in capital.
The company reported adjusted gross profit of $1,045 million compared with $1,124 million in the year-earlier quarter. Adjusted gross profit margin for the quarter was 40.7% compared with 40.2% in the prior-year quarter. Adjusted operating profit for the quarter was $342 million compared with $361 million in second-quarter 2016. Adjusted operating margin was 13.3%, up 40 basis points year over year.
As of Jun 30, 2017, Xerox had cash and cash equivalents of $1,246 million while long-term debt was $4,236 million. Net cash from operating activities for the quarter was $328million.
Xerox narrowed its full-year 2017 guidance, reflecting its one-for-four reverse stock split. It currently expects GAAP earnings in the range of $1.84 to $2.08 per share and adjusted earnings per share in the range of $3.20 to $3.44.The company continues to expect cash flow to be around $700–$900 million and free cash flow to be in the range of $525–$725 million in 2017.
Xerox Corporation Price, Consensus and EPS Surprise
Xerox Corporation Price, Consensus and EPS Surprise | Xerox Corporation Quote
Xerox currently has a Zacks Rank #3 (Hold). A couple of better-ranked stocks in the same industry are Healthcare Services Group, Inc. HCSG and Mitie Group plc MITFY. Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Healthcare Services Group has a long-term earnings growth expectation of 11%.
Mitie Group has a long-term earnings growth expectation of 1%.
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