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Xerox (XRX) Earnings Beat Estimates in Q3, Revenues Lag
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Xerox Corporation (XRX - Free Report) reported mixed third-quarter 2018 results, wherein the company’s bottom line surpassed the Zacks Consensus Estimate but the top line lagged the same.
Adjusted earnings per share of 85 cents beat the consensus mark by 8 cents but declined 4 cents from the year-ago quarter number. Total revenues of $2.35 billion missed the consensus mark by $68 million. The top line also decreased 5.8% year over year on a reported basis and 4.7% on a constant-currency basis.
So far this year, shares of Xerox have declined 8.6% against the industry’s 2.2% growth.
Let’s check out the numbers in detail.
Revenues by Segment
Equipment sales totaled $511 million, which decreased 3.8% year over year on a reported basis and 2.7% on a constant-currency basis. The segment accounted for 22% of total revenues.
Post sale revenues of $1.84 billion declined 6.4% year over year on a reported basis and 5.2% on a constant-currency basis. The segment contributed 78% to total revenues.
Revenues by Region
Revenues from North America came in at $1.44 billion, down 4.6% year over year on a reported basis and 4.2% on a constant-currency basis. The region contributed 61% to total revenues.
Internationalrevenues amounted to $814 million, down 4.6% year over year on a reported basis and 2% on a constant-currency basis. The region accounted for 35% of total revenues.
Revenues from Other region summed $94 million, down 27.7% year over year on a reported as well as on a constant-currency basis. The region contributed 4% to total revenues.
Gross profit of $942 million decreased 5.9% from the prior-year quarter number. Total gross margin of 40.1% remained flat year over year.
While equipment gross margin expanded 510 basis points (bps) year over year to 34.6%, post sale gross margin contracted 120 bps to 41.7%.
Adjusted operating profit of $307 million was up 1.7% year over year. Adjusted operating margin improved 100 bps year over year to 13.1%.
Selling, administrative and general expenses, as a percentage of revenues, declined to 24.8% from 25.2% in the year-ago quarter.Research, development and engineering expenses, as a percentage of revenues, increased to 4.3% from 4.2% in the prior-year quarter.
Balance Sheet and Cash Flow
Xerox exited the third quarter with cash, cash equivalents and restricted cash balance of $1.22 billion compared with $1.33 billion at the end of the previous quarter. Long-term debt was $4.82 billion compared with $4.81 billion in the preceding quarter. The company generated $274 million of cash from operating activities in the reported quarter.
During the quarter, Xerox returned $284 million through share repurchase and $69 million through dividends.
2018 Guidance
Xerox has raised its cash flow guidance for full year. The company now expects operating cash flow in the range of $1-$1.1 billion compared with $900 million-$1.1 billion projected earlier. Free cash flow is now anticipated in the band of $900 million-$1 billion compared with $750-$950 million anticipated previously.
For 2018, the company also increased its share repurchase expectations to $700 million from $500 million. Management plans to inform investors about the company’s strategy and long-term financial expectations on its analyst day, which will be held later this year or early 2019.
Investors interested in the broader Business Services sector are keenly awaiting earnings reports of key players like Booz Allen Hamilton Holding (BAH - Free Report) , Waste Connections (WCN - Free Report) and First Data . While Booz Allen Hamilton will report second-quarter fiscal 2019 results on Oct 29, Waste Connections and First Data will release third-quarter 2018 results on the same day.
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It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Xerox (XRX) Earnings Beat Estimates in Q3, Revenues Lag
Xerox Corporation (XRX - Free Report) reported mixed third-quarter 2018 results, wherein the company’s bottom line surpassed the Zacks Consensus Estimate but the top line lagged the same.
Adjusted earnings per share of 85 cents beat the consensus mark by 8 cents but declined 4 cents from the year-ago quarter number. Total revenues of $2.35 billion missed the consensus mark by $68 million. The top line also decreased 5.8% year over year on a reported basis and 4.7% on a constant-currency basis.
So far this year, shares of Xerox have declined 8.6% against the industry’s 2.2% growth.
Let’s check out the numbers in detail.
Revenues by Segment
Equipment sales totaled $511 million, which decreased 3.8% year over year on a reported basis and 2.7% on a constant-currency basis. The segment accounted for 22% of total revenues.
Post sale revenues of $1.84 billion declined 6.4% year over year on a reported basis and 5.2% on a constant-currency basis. The segment contributed 78% to total revenues.
Revenues by Region
Revenues from North America came in at $1.44 billion, down 4.6% year over year on a reported basis and 4.2% on a constant-currency basis. The region contributed 61% to total revenues.
Internationalrevenues amounted to $814 million, down 4.6% year over year on a reported basis and 2% on a constant-currency basis. The region accounted for 35% of total revenues.
Revenues from Other region summed $94 million, down 27.7% year over year on a reported as well as on a constant-currency basis. The region contributed 4% to total revenues.
Xerox Corporation Revenue (TTM)
Xerox Corporation Revenue (TTM) | Xerox Corporation Quote
Operating Results
Gross profit of $942 million decreased 5.9% from the prior-year quarter number. Total gross margin of 40.1% remained flat year over year.
While equipment gross margin expanded 510 basis points (bps) year over year to 34.6%, post sale gross margin contracted 120 bps to 41.7%.
Adjusted operating profit of $307 million was up 1.7% year over year. Adjusted operating margin improved 100 bps year over year to 13.1%.
Selling, administrative and general expenses, as a percentage of revenues, declined to 24.8% from 25.2% in the year-ago quarter.Research, development and engineering expenses, as a percentage of revenues, increased to 4.3% from 4.2% in the prior-year quarter.
Balance Sheet and Cash Flow
Xerox exited the third quarter with cash, cash equivalents and restricted cash balance of $1.22 billion compared with $1.33 billion at the end of the previous quarter. Long-term debt was $4.82 billion compared with $4.81 billion in the preceding quarter. The company generated $274 million of cash from operating activities in the reported quarter.
During the quarter, Xerox returned $284 million through share repurchase and $69 million through dividends.
2018 Guidance
Xerox has raised its cash flow guidance for full year. The company now expects operating cash flow in the range of $1-$1.1 billion compared with $900 million-$1.1 billion projected earlier. Free cash flow is now anticipated in the band of $900 million-$1 billion compared with $750-$950 million anticipated previously.
For 2018, the company also increased its share repurchase expectations to $700 million from $500 million. Management plans to inform investors about the company’s strategy and long-term financial expectations on its analyst day, which will be held later this year or early 2019.
Zacks Rank & Upcoming Releases
Xerox currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors interested in the broader Business Services sector are keenly awaiting earnings reports of key players like Booz Allen Hamilton Holding (BAH - Free Report) , Waste Connections (WCN - Free Report) and First Data . While Booz Allen Hamilton will report second-quarter fiscal 2019 results on Oct 29, Waste Connections and First Data will release third-quarter 2018 results on the same day.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>