Will Xerox (XRX) Miss this Earnings Season? - Analyst Blog

Information technology services provider Xerox Corporation XRX is scheduled to report its first quarter 2014 results before the opening bell on April 22. In the last reported quarter, Xerox's adjusted earnings were in line with the Zacks Consensus Estimate. Let's see how things are shaping up for this announcement.

Growth Factors in the First Quarter

Xerox expects the Services segment to fetch 66% of total revenues by 2017, up from 55% in 2013. To achieve this objective, Xerox is focusing more on vertical markets like healthcare. Xerox recently entered into a $28 million contract with PatientPoint to implement PatientPoint technology to help improve healthcare. Additionally, Xerox Innovation Group announced that a suite of healthcare research projects conducted in India by Xerox Research Centre India (XRCI) and Xerox Research Center Webster (XRCW) in New York use video cameras and data analytics to monitor a patient's condition.

The company has already begun to reap huge benefits from Medicaid Management Information System (MMIS) through the 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, a few days back, Xerox-Government and Transportation Sector Technology delivery Center achieved ISO 9001 quality management system certification for superior operational performance and enhanced commitment to customers.

Earnings Whispers

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 recipe.

Zero Zacks ESP: Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at 0.00%. This indicates a likely in line earnings for the shares.

Zacks Rank #3 (Hold): Xerox's Zacks Rank #3 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. However, when combined with 0.00% ESP, the Zacks Rank #3 fails to conclusively predict an earnings surprise for Xerox. Meanwhile, we caution against stocks with Zacks #4 and #5 Ranks (Sell rated stocks) going into the earnings announcement.  

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:

Aspen Insurance Holdings Ltd. AHL, earnings ESP of +6.12% and Zacks Rank #1 (Strong Buy).

Alaska Air Group, Inc. ALK, earnings ESP of +7.14% and Zacks Rank #1 (Strong Buy).

Envision Healthcare Holdings, Inc. EVHC, earnings ESP of +5.26% and Zacks Rank #1 (Strong Buy).