Information technology services provider
) recently hit a new 52-week high of $13.29 on Jul 25, 2014, before
closing the trading session a notch lower at $13.15. This
translates to a healthy one-year return of 36.3%.
Xerox's share price has been on a steady uptrend since Feb 2014.
Despite its strong price appreciation, this Zacks Rank #2 (Buy)
stock still has enough fundamentals that may further drive its
price upward. The stock is currently trading at a forward P/E of
11.9x and has a long-term earnings growth expectation of 7.3%.
Xerox reported adjusted earnings (from continuing operations) of
$322 million or 27 cents per share in the second quarter of 2014
compared with $345 million or 27 cents per share in the
year-earlier quarter. Adjusted earnings for the reported quarter
marginally exceeded the Zacks Consensus Estimate by a penny.
Revenues from the Services segment, which include Document
Outsourcing (DO), Business Process Outsourcing (BPO) and
Information Technology Outsourcing (ITO), increased 2% year over
year to $2,992 million in the reported quarter (57% of total
revenues). While revenues from DO, ITO and BPO increased due to
growth in commercial healthcare and commercial European BPO
businesses, improvement in Europe and strength in healthcare
offerings further bolstered the segment's top-line growth.
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
replace New York's Medicaid management system, according to a
New York's Medicaid program, which includes $52 billion of annual
billings by health care providers, 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 programs. Also, Xerox is looking
forward to expand its offerings through inorganic measures to add
more clients to its portfolio.
Other Stocks to Consider
Xerox currently has a Zacks Rank #2 (Buy). Other stocks that look
promising in the industry include Canon Inc. (
), which carries a Zacks Rank #1 (Strong Buy), and Ametek Inc. (
) and Ricoh Company, Ltd (
), both carrying a Zacks Rank #2 (Buy).
(We are reissuing this article to correct a mistake. The
original article, issued on July 28, 2014, should no longer be
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