Post Earnings Coverage as Xerox Beats Market Expectation with the Split Looming Large

LONDON, UK / ACCESSWIRE / August 2, 2016 / Active Wall St. announces its post-earnings coverage on Xerox Corp. (NYSE:XRX). The company revealed its financial results for Q2 FY16 on July 29, 2016. The printer and copier maker posted better-than-expected results as restructuring efforts ahead of its proposed separation into two independent companies helped with declining expenditures. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the quarter ended on June 30, 2016, Xerox’s earnings jumped 45% to $155 million, or $0.15 per share, compared to earnings of $12 million, or $0.10 per share in the year ago period. On an adjusted basis, the company earned $0.30 per share, beating analysts’ estimate of $0.25 per share. Revenue declined 4.5% to $4.39 billion, in line with market expectation. Xerox’s total revenue has now declined for the sixth consecutive quarter.

Xerox Chairman and CEO, Ursula Burns, stated in the earnings report:

“Our Services segment delivered substantial margin expansion and continued revenue growth in Document Outsourcing. Document Technology revenue declines moderated and margin improved driven by cost and productivity initiatives. We reached critical milestones in both the separation process and strategic transformation program during the second quarter.”

Segment Update

During Q2 FY16, revenue from Xerox’s document technology segment, which includes printers and copiers, dropped nearly 7% at $1.8 billion. The legacy business is Xerox’s biggest, accounting for about 40% of total revenue. Revenue from the company’s business process outsourcing division dropped nearly 4%. However, revenue rose about 1% in its document outsourcing business in the reported quarter. For Q2 FY16, revenue in the company’s services business declined 2% to $2.47 billion.

The company, which is in the process of splitting into two different entities, announced that it reduced about 1,300 jobs globally in Q2 FY16. Xerox’s total costs declined 6% to $4.24 billion. This included restructuring and related charges of $71 million, less than the $100 million the company had estimated in April 2016.

Spin-Off

The Norwalk, Connecticut, headquartered company has been working to separate the business by the end of the year into two separate entities: the $11 billion document technology seller which will keep the Xerox name and the $7 billion services department, which will be renamed Conduent Inc. Xerox said it now expects one-time pre-tax separation costs of $175 million-$200 million, lower than the $200 million-$250 million it had estimated earlier. The split is expected to be completed by the end of 2016.

Guidance

Xerox expects Q3 FY16 GAAP earnings of $0.14 to $0.16 per share and adjusted earnings of $0.26 to $0.28 per share. Analysts were expecting earnings of $0.28 on revenue of $4.33 billion. The company also reaffirmed its FY 2016 adjusted earnings forecast of $1.10 to $1.20 per share. Analysts are looking for earnings of $1.09 per share on revenues of $17.53 billion.

Stock Performance

Following the earnings release Xerox’s shares climbed 3.94% closing the trading session on Friday, July 29, 2016, at $10.30 with a total volume of 21.48 million shares.

On Monday, August 01st, 2016, the company’s stock finished the day at $10.14, down 1.55% on volume of 14.92 million. Xerox’s shares have grown 6.85% in the past one month.

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