Xerox Corp
. (
XRX
) reported GAAP earnings of $335 million or 26 cents per share in
the fourth quarter of 2012 compared with $375 million or 26
cents in the year-ago quarter, driven by decrease in sales in the
Technology segment.. Adjusted EPS in the quarter stood at 30
cents, ahead of the Zacks Consensus estimate by 2
cents.
For fiscal 2012, GAAP earnings stood at 88 cents, down 2% year
over year. Adjusted earnings stood at $1.03 per share for
the full year, in line with the Zacks Consensus Estimate
Revenues in the quarter declined 1% (flat in constant currency)
year over year to $5.9 billion, missing the Zacks Consensus
Estimate of $5.8 billion. For fiscal 2012, revenue stood at
$22.4 billion down 1% year over year.
Operating margin was up 0.3 basis points to 10.3% in the fourth
quarter, driven by savings from restructuring and lower selling
and administrative expenses. Gross margin dipped 0.7% basis
points to 31.5% in the reported quarter. This decrease was
driven primarily by the higher overall mix of Services revenue.
Segment Performance
Revenues from the Services segment, which include Document
Outsourcing (DO), Business Process Outsourcing (BPO) and
Information Technology Outsourcing (ITO), rose 7% to $3.0 billion
in the fourth quarter (with no impact from currency), driven by
higher revenues from all three subdivisions.
Growth in government healthcare, transportation businesses and
customer care helped BPO revenues improve 8% in the reported
quarter. Revenues from the DO segment rose 2% (with no impact
from currency) due to new partner print services offerings.
Revenues from ITO segment went up 15% (Including 1% negative
impact from currency) on signings growth in the fourth quarter.
Revenues in the Technology segment dipped 8% to $2.5 billion,
with no negative impact from currency. The decline was
attributable to a 14% fall in equipment sales and a 4% decline in
annuity revenues. The disappointing performance of this segment
stems from the fact that Xerox's customers are migrating to its
partner print services offering.
Revenues in the Other segment went down 4% to $374.0 million,
including a negative impact of 1% point from currency. The
decline in revenues was attributable to lower patent sales and
licensing revenue
Financial Position
Xerox had cash and cash equivalents of $1246.0 million as of Dec
30, 2012, compared with $902.0 million as of Dec 31, 2011. Total
debt stood at $8.5 billion as of Dec 30, 2012, compared with $8.6
billion as of Dec 31, 2011.
The company generated $1.8 billion in cash from operations during
the fourth quarter and expects to generate operating cash flow of
$2.1 billion to $2.4 billion in fiscal 2013
Guidance
In fiscal 2012, Xerox focused on scaling its services business to
align itself with growth opportunities in the $600 billion
market. For first quarter 2013, the company expects adjusted
earnings between 23 cents and 25 cents a share and expects
adjusted EPS of $1.09 to $1.15 in fiscal 2013.
However, the company needs to be wary of its competitors, which
include formidable names such as
Lexmark International Inc
(
LXK
) and
Canon Inc
(
CAJ
).
Xerox Corp currently has a Zacks Rank #4 (Sell). One of its
competitors
Pitney Bowes Inc
(
PBI
) carries a Zacks Rank #4 (Sell).
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