Xerox Corporation (XRX) is scheduled to report third-quarter 2014 results before the opening bell on Oct 22. In the last reported quarter, Xerox’s earnings beat the Zacks Consensus Estimate by a penny. Let’s see how things are shaping up for this announcement.
Factors to Consider
Xerox remains committed to its 5-plank strategy that is centered on portfolio management, global growth, cost transformation, operational excellence and analytics. With sustained investments to expand geographical footprint and build its services capabilities in areas that provide significant customer value, Xerox expects to reap significant benefits in the long run.
The new Juvo platform is expected to boost Xerox's portfolio of business process management and give it a leading role in the changing healthcare model. Also, the company is expected to reap significant benefits from sustained product introductions.
However, advancements in IT have replaced the traditional means of sending and storing information by digital media. As a result, Xerox and other document industry firms are grappling with decreased demand for paper-related systems and products. This, in turn, is hurting its overall profitability. Another major threat involves the availability of a large number of substitutes owing to strong peer presence.
A significant portion of the company’s revenues are generated from operations 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.
Earnings Whispers
Our proven model does not conclusively show that Xerox will beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This is because both the Most Accurate estimate and Zacks Consensus Estimate currently stand at 26 cents.
Zacks Rank #3 (Hold): Xerox’s Zacks Rank #3 when combined with 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat in the imminent future.
Arch Capital Group Ltd. (ACGL) earnings ESP of +2.07% and Zacks Rank #2.
Abaxis, Inc. (ABAX) earnings ESP of +4.55% and Zacks Rank #2.
Nordson Corp. (NDSN) earnings ESP of +0.88% and Zacks Rank #2.
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