Will Xerox Beat The Market? - Xerox Holdings (NASDAQ:XRX)

In a report published Monday, BMO Capital Markets analyst Keith Bachman offered some thoughts on

Xerox CorpXRX

, noting that his "scorecard" for calendar year 2015 includes more positives than negatives.

The Positives
According to Bachman, Xerox's printing business has declined by an average of 6.6 percent year over year over the past three years. However, the company's increasing focus on the low-end laser market and its 2013 acquisition of production inkjet company Impika could help ease the declines in the segment. Xerox will anniversary the loss of the Texas Medicaid contract in August 2015 that created approximately a negative 150 basis point year over year headwind to revenue growth. Meanwhile, Xerox has won two new meaningful contracts with the State of New York for Medicaid claims and to operate toll roads in Florida. The analyst noted that both of these new contracts should be awarded in the second half of the year and provide a "modest" revenue boost. Finally, Xerox is in a position to expand its International operations which currently accounts for 25 percent of its business. The stated that he "will not be surprised" if the company used M&A to try and accelerate services growth in Europe.

The Negatives

Bachman's "checklist" of negatives include continued foreign exchange impacts that resulted in a lower 2015 earnings per share estimate of $1.02 (from a previous $1.03). There also exists some risk to printer margins moving forward. In 2014, Xerox's printer margins were 13.7 percent compared with 10.8 percent in the prior year. The improved margin was aided by lower pension expansions and favorable foreign exchange rates, specially the yen. For fiscal 2015, the analyst argued that the yen will help support only 15 to 20 basis points of consolidated margin (versus 40 basis points a year ago), providing a "muted" impact to margins at a time when the euro continues to weaken.

First Quarter Estimates And Rating

Bachman is projecting the company to earn $0.21 in the first quarter on revenue of $4.524 billion when the company reports on Friday. This compares to the Wall Street Consensus estimate that is looking for an earnings per share of $0.21 on revenue of $4.511 billion. Shares remain Market Perform rated with an unchanged price target of $14.50.

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