On Dec 4, Zacks Investment Research updated the research report on business process and document management company Xerox Corp. XRX.
In late October, Xerox reported tepid third-quarter 2015 results as earnings and revenues decreased year over year, although adjusted earnings beat the Zacks Consensus Estimate by a couple of cents.
Xerox reported net loss from continuing operations of $31 million or loss of 4 cents per share in third-quarter 2015 compared with net income from continuing operations of $258 million or 21 cents per share in the year-ago quarter. The sharp year-over-year decrease in GAAP earnings was primarily attributable to lower revenues.
Total revenue in the reported quarter aggregated $4,333 million, significantly down from $4,795 million in the year-ago quarter, and well short of the Zacks Consensus Estimate of $4,540 million. The year-over-year decrease in revenues was attributable to a decline in revenues in all segments and adverse currency exchange rates.
Moving forward, the presence of a large number of substitutes and strong competition are likely to peg back Xerox’s profitability to some extent. Fluctuations in foreign currency exchange rates and delays in implementation of government health care projects continue to further affect its margins.
However, Xerox is intensely focused on improving its services margin and implementing restructuring actions and prioritizing investments to accelerate benefits in the future quarters. Xerox also 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 benefits in the long run.
In order to better adapt to the changing market trends, Xerox is also continually shifting its business model by expanding indirect distribution channel and streamlining its supply chain and product portfolio. The company expects to maintain its strong market share in Document Technology business with innovative products to meet the demands of customized communications in digital printing. Xerox is also integrating its market-leading Managed Print Services (MPS) with its business process and IT outsourcing capabilities. MPS enables clients to gain visibility and control of printing to save money, improve productivity, boost environmental sustainability and document security. The integration will automate workflow with technology and consulting services to help clients meet the requirements of mobile workforce.
We believe that such focused actions will serve this Zacks Rank #4 (Sell) stock in good stead in the future. Some other better-ranked stocks in the industry that are worth a look at the moment include Rentrak Corporation RENT and Vectrus, Inc. VEC, both carrying a Zacks Rank #1 (Strong Buy), and SPS Commerce, Inc. SPSC that carries a Zacks Rank #2 (Buy).
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