Information technology services provider
) is scheduled to report its second-quarter 2014 results before the
opening bell on Jul 25. In the last reported quarter, Xerox's
adjusted earnings exceeded the Zacks Consensus Estimate by 4 cents.
Let's see how things are shaping up for this announcement.
Growth Factors in the Second Quarter
Xerox expects the Services segment to fetch 66% of its total
revenues by 2017, up from 55% in 2013. To achieve this objective,
Xerox is focusing more on vertical markets like healthcare. Xerox
recently secured an estimated $500 million worth contract to
reinstate New York's Medicaid management system, according to a
New York's Medicaid program, worth $52 billion, is the biggest
in the nation. Xerox's selection as the vendor for the state may
open doors to more lucrative opportunities for the document imaging
giant, once the other states follow New York's footsteps and revamp
their Medicaid payment systems.
The company has already begun to reap huge benefits from the
Medicaid Management Information System (MMIS) through its
successful implementation and CMS (Centers for Medicare and
Medicaid Services) Certification in all the 31-state Medicaid
programs. Also, Xerox is looking forward to expand its offerings
through inorganic measures to add more clients to its portfolio.
Additionally, during the quarter, Xerox was awarded a $51 million
contract to provide South Carolina residents with debit cards to
allow them access to food stamps or welfare benefits. Xerox
provides card service programs to nearly 25 million people in 29
states, and continued contracts for such services offer a healthy
revenue stream for top-line growth.
Despite focused attempts to restructure its business, our proven
model does not conclusively show that Xerox is likely to beat
earnings this quarter as it lacks the key ingredients for a success
Zero Zacks ESP:
Expected Surprise Prediction or
, which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is currently pegged at
0.00%. This indicates a likely in line earnings for the shares.
Zacks Rank #4 (Sell):
Xerox's Zacks Rank #4 reduces the predictive power of ESP. Note
that stocks with Zacks Ranks of #1, #2 and #3 have a significantly
higher chance of beating earnings. We caution against stocks with
Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings
announcement. When combined with 0.00% ESP, the Zacks Rank #4 fails
to conclusively predict an earnings surprise for Xerox. Rather, the
probability of an earnings miss in the soon-to-be-reported quarter
is comparatively higher.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows
that these have the right combination of elements to post an
earnings beat this quarter:
American Capital Agency Corp.
), earnings ESP of +6.06% and Zacks Rank #2 (Buy).
Credit Acceptance Corp.
), earnings ESP of +2.39% and Zacks Rank #2 (Buy).
CH Robinson Worldwide Inc.
), earnings ESP of +2.60% and Zacks Rank #2 (Buy).
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