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Xerox (XRX) Beats on Q3 Earnings, Revenues Down Y/Y

Xerox CorporationXRX 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 year-over-year decrease in GAAP earnings was primarily due to lower revenues and charges.

Excluding the non-recurring items, adjusted earnings (from continuing operations) for the reported quarter were $258 million or 24 cents per share versus $306 million or 26 cents per share in the year-earlier quarter. Adjusted earnings for the reported quarter beat the Zacks Consensus Estimate by 2 cents.

Total revenue in the reported quarter stood at $4,333 million versus $4795 million in the year-ago quarter. The reported revenues missed the Zacks Consensus Estimate of $4,540 million. The year-over-year decrease in revenues was attributable to decline in revenues in all segments and adverse currency exchange rates.

Operating margin for the reported quarter was down 0.9% year over year to 8.7%, while gross margin fell by 9.4% to 22.8%. The decrease in operating margin was owing to by lower services margin driven by resource and other investments.

Segment Performance

Revenues from the Services segment, which include Document Outsourcing (DO) and Business Process Outsourcing (BPO) decreased 8% year over year to $2,416 million in the reported quarter. BPO revenues fell 10% to $1,616 million due to adverse currency exchange rates. Revenues from DO decreased 3% year over year to $800 million as growth in the partner print services offerings was offset by continued declines in developing markets.

Third quarter 2015 Services segment margin stood at (7.6%). Total contract value of service signings aggregated $1.9 billion with BPO and DO accounting for $1.3 billion and $582 million, respectively. Signings decreased 7% year over year.

Revenues in the Document Technology segment dipped 12% year over year to $1,778 million due to negative currency impact. Segment margin fell 1.2% year over year to 12.8%. The revenue mix for the segment comprised 58% mid-range, 23% high-end and 19% for entry-level products.

Revenues in the Other segment decreased 3% to $139 million. Segment loss of $76 million decreased $6 million from the year-ago quarter.

Financial Position.

As of Sep 30, 2015, Xerox had cash and cash equivalents of $804 million compared with $1,411 million as of Dec 31, 2014. Long-term debt at the end of the reported quarter stood at $6,393 million versus $6,314 million as of Dec 31, 2014.

Net cash provided by operating activities for the quarter stood at $271 million versus $595 million in the year-ago period. The company repurchased $691 million worth of shares during the quarter.

Outlook

Xerox expects fourth-quarter 2015 GAAP earnings to be in range of 23- 25 cents per share and adjusted EPS in the range of 28 to 30 cents.

For full-year 2015, Xerox expects GAAP earnings in the range of 46 cents to 52 cents per share and adjusted EPS in the range of 95 cents to $1.01.

Xerox expects full-year 2015 cash flow from operations of $1.6 to $1.7 billion and free cash flow from operations of $1.3 to $1.4 billion.

Xerox continues to focus on strengthening its offering portfolio, improving productivity and targeting its highest-margin segments.

Xerox currently has a Zacks Rank #4 (Sell). Other favorably-ranked stocks that currently look promising in the industry include comScore, Inc. SCOR , Core-Mark Holding Company, Inc CORE and Liberty Tax, Inc. TAX , each carrying a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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