Xerox 2015 Guidance Below Consensus; Reviews Prospects - Analyst Blog

Xerox Corporation (XRX) appraised investors of its operational progress and long-term strategy. It also provided a somewhat subdued guidance for 2015, and announced that it is expanding its share buyback program.

The company is focused on expanding its presence in the document management and technology market by continued innovation. It has also undertaken several initiatives to identify markets with high potential like healthcare and transportation, and establish a strong presence in the same.

Guidance

Summarizing its expectations for financial performance in 2015, the document management company projected 2015 adjusted earnings per share ("EPS") to lie in a band of $1.11 to $1.17. The guidance lags the Zacks Consensus Estimate for 2015, which currently stands at $1.19. The company reiterated its adjusted EPS guidance for 2014 of $1.11–$1.13, with the Zacks Consensus Estimate pegged within the said range at $1.12.

Operating cash flow for 2015 is expected to lie within $1.9–$2.1 billion. Xerox also added $1.5 billion to its share repurchase authorization, and expects to spend at least $500 million in buybacks in the coming year.

In addition, the company expects to use up to $500 million for acquisitions and projects around $300 million spending on dividends.

Recent Developments

In a bid to expand its portfolio of offerings for addressing the demand for automating government workflows, Xerox recently acquired Consilience Software, Inc., a case management and workflow automation software provider. Additionally, the company launched an advanced analytics platform named Juvo, which allows hospitals to analyze patient-care data, and aids in improving healthcare quality.

The company recently formed an alliance with the University of Michigan Mobility Transformation Center to develop sophisticated solutions aimed at transforming transportation globally. These actions are expected to strengthen its position in the healthcare and transportation markets.

Xerox is attempting to integrate its outsourcing capabilities with its Managed Print Services, in order to automate workflow with technology and consulting services. The company launched 23 new products this year and is pioneering new, inventive solutions in the high-end custom printing marketplace as well.

Our Take

A long-established player in the document business, Xerox is trying to evolve its operating model and grab market share in industries like healthcare and transportation. The company is struggling with slowing demand in the printing business, and has lately been focusing on services to counteract the same. In its third-quarter results, revenues from its document-technology business fell 6% to $2 billion, while services revenues ticked up 1% to $2.9 billion.

Weak outlook for document business and considerable costs of expanding its services business are some of the challenges that Xerox needs to conquer, going forward. The services business has great potential in coming times, with momentous demand for advanced analytics in healthcare generated by the Affordable Care Act. If Xerox can overcome the persistent headwinds in its government healthcare program and capitalize on these opportunities, it can prove to be very lucrative and drive revenue growth, going forward.

Xerox presently carries a Zacks Rank #3 (Hold). Better-ranked stocks that look promising in the broader computer and technology sector include Canon Inc. (CAJ), sporting a Zacks Rank #1 (Strong Buy), and Pitney Bowes Inc (PBI) and CBIZ, Inc (CBZ), both holding a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
XEROX CORP (XRX): Free Stock Analysis Report
 
PITNEY BOWES IN (PBI): Free Stock Analysis Report
 
CANON INC ADR (CAJ): Free Stock Analysis Report
 
CBIZ INC (CBZ): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research