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Xerox Holdings Corporation (XRX) Down 2.1% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Xerox Holdings Corporation (XRX - Free Report) . Shares have lost about 2.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Xerox Holdings Corporation due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Xerox Lags On Q1 Earnings Estimates

Xerox reported mixed first-quarter 2021 results, with earnings missing the Zacks Consensus Estimate but revenues beating the same.

Adjusted earnings per share of 22 cents missed the consensus mark by 4.4% but increased 4.8% year over year. Total revenues of $1.71 billion surpassed the consensus mark by 5.7% but declined 8.1% year over year on a reported basis and 10.4% on a constant-currency basis. The coronavirus pandemic had a significant negative impact on the company’s quarterly results.

Revenues in Detail

Equipment sales revenues totaled $381 million, up 17.2% year over year on a reported basis and 14.2% on a constant-currency basis, contributing 22% to total revenues. Post-sale revenues totaled $1.33 billion, down 13.4% year over year on a reported basis and 15.6% on a constant-currency basis, contributing 78% to total revenues.

Operating Performance

Adjusted operating profit of $89 million increased 2.3% year over year. Adjusted operating margin expanded 50 basis points (bps) year over year to 5.2%. Selling, administrative and general expenses, as a percentage of revenues, decreased 290 bps year over year to 26.2%. Research, development and engineering expenses, as a percentage of revenues, were 4.3%, down from the year-ago quarter’s 4.5%.

Key Balance Sheet and Cash Flow Figures

Xerox exited the quarter with cash, cash equivalents and restricted cash balance of $2.38 billion compared with $2.63 billion at the end of the prior quarter. Long-term debt was $3.67 billion compared with $4.05 billion at the end of the previous quarter.

The company generated $117 million of cash from operating activities and paid out $54 million as dividends. Capital expenditures and free cash flow during the quarter were $17 million and $100 million, respectively.

2021 Guidance

Xerox expects operating cash flow and free cash flow to be $600 million and $500 million, respectively, in 2021.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 31.34% due to these changes.

VGM Scores

Currently, Xerox Holdings Corporation has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Xerox Holdings Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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