'Better Execution' Coming For Xerox, Susquehanna Says

In a report published Monday, Susquehanna analyst James E Friedman maintained a Positive rating on Xerox Corp XRX, with a price target of $16.50. "Our thesis has been that Xerox has a capable and undervalued services practice with many success stories. But we didn't expect the poor execution in their Government Healthcare Practice," analyst James Friedman wrote. Although this segment contributes merely 10 percent of revenue, "problems there have been big enough to matter," Friedman said, while adding the Senior Management is trying to fix the problems. In the report Susquehanna noted, "Roughly 2/3 of Xerox Government Health appears fine, with decent demand and predictable margins. But Xerox has suffered a number of setbacks in the other third of the Government Healthcare practice." Xerox reduced its Services margin guidance in 1Q15 to 8.5-9 percent partly on account of higher costs within the health enterprise implementation. "The most recent issue was California health, which caused 2/3 of the $30 mln revision to guidance," Friedman mentioned. "Not all bad," Friedman commented, while highlighting that New Hampshire was the first and is "up, running and referencable." Moreover Alaska is also launched, which may have "some modest issues related to hospital collection speed," but these are reflected in the guidance.