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Why You Should Retain Xerox (XRX) in Your Portfolio Now
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Xerox Holdings Corporation (XRX - Free Report) has had an impressive run over the past three months. The stock has gained 11.5%, significantly outperforming the 7.1% rally of the industry it belongs to and the 5.6% rise of the Zacks S&P 500 composite.
The company’s earnings for 2023 and 2024 are expected to improve 51.8% and 2.4%, respectively, year over year.
The company’s bottom line is benefiting from "Project Own It," an enterprise-wide transformation initiative aimed at increasing productivity and operational efficiency, reducing costs, as well as realigning the business to changing market conditions."Project Own It” is contributing significantly toward freeing up capital for investment. Through this initiative, Xerox achieved gross savings of $2.2 billion from 2018 to 2022.
Xerox has a post-sale-driven business model that provides significant recurring revenues and cash generation. Around 77% of the company’s total revenues in 2022 were associated with contracted services, equipment maintenance services, consumable supplies and financing. This business model supports strong cash flows that help the company make strategic investments and penetrate markets with high growth potential.
XRX recently acquired Advanced UK, a U.K.-based hardware and printing service provider. The acquisition is expected to help in Xerox’s vertical integration, along with strengthening its foothold in the U.K. The 2022 acquisition of Powerland has fortified Xerox’s IT services offerings in North America, which include cyber security, cloud, end-user computing and managed services. Another 2022 acquisition, Go Inspire, is helping the company to expand its global Digital Services presence in EMEA.
Some Risks
Xerox’s current ratio at the end of the second quarter of 2023 was pegged at 1.15, lower than the current ratio of 1.26 reported at the end of the prior quarter and 1.2 reported at the end of the prior-year quarter. A decline in the current ratio does not bode well.
Zacks Rank and Stocks to Consider
Xerox currently carries a Zacks Rank #3 (Hold).
Investors interested in the Zacks Business Services sector can consider the following stocks:
Earnings for 2023 are expected to grow 39% while revenues are anticipated to gain 14.8% from the year-ago figure. APTV has a trailing four-quarter earnings surprise history of 13.4%.
Clean Harbors (CLH - Free Report) has a Zacks Rank #2 and carries a VGM Score of A. Earnings for 2023 are expected to be slightly down year over year while revenues are anticipated to increase 5.3% year over year. CLH has a trailing four-quarter earnings surprise history of 13%.
Verisk Analytics (VRSK - Free Report) carries a Zacks Rank #2. Earnings for 2023 are expected to grow 14% while revenues are anticipated to fall 8.3% from the year-ago figure. VRSK has a trailing four-quarter earnings surprise history of 9.9%.
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Why You Should Retain Xerox (XRX) in Your Portfolio Now
Xerox Holdings Corporation (XRX - Free Report) has had an impressive run over the past three months. The stock has gained 11.5%, significantly outperforming the 7.1% rally of the industry it belongs to and the 5.6% rise of the Zacks S&P 500 composite.
The company’s earnings for 2023 and 2024 are expected to improve 51.8% and 2.4%, respectively, year over year.
Xerox Holdings Corporation Price
Xerox Holdings Corporation price | Xerox Holdings Corporation Quote
Factors That Bode Well
The company’s bottom line is benefiting from "Project Own It," an enterprise-wide transformation initiative aimed at increasing productivity and operational efficiency, reducing costs, as well as realigning the business to changing market conditions."Project Own It” is contributing significantly toward freeing up capital for investment. Through this initiative, Xerox achieved gross savings of $2.2 billion from 2018 to 2022.
Xerox has a post-sale-driven business model that provides significant recurring revenues and cash generation. Around 77% of the company’s total revenues in 2022 were associated with contracted services, equipment maintenance services, consumable supplies and financing. This business model supports strong cash flows that help the company make strategic investments and penetrate markets with high growth potential.
XRX recently acquired Advanced UK, a U.K.-based hardware and printing service provider. The acquisition is expected to help in Xerox’s vertical integration, along with strengthening its foothold in the U.K. The 2022 acquisition of Powerland has fortified Xerox’s IT services offerings in North America, which include cyber security, cloud, end-user computing and managed services. Another 2022 acquisition, Go Inspire, is helping the company to expand its global Digital Services presence in EMEA.
Some Risks
Xerox’s current ratio at the end of the second quarter of 2023 was pegged at 1.15, lower than the current ratio of 1.26 reported at the end of the prior quarter and 1.2 reported at the end of the prior-year quarter. A decline in the current ratio does not bode well.
Zacks Rank and Stocks to Consider
Xerox currently carries a Zacks Rank #3 (Hold).
Investors interested in the Zacks Business Services sector can consider the following stocks:
Aptiv (APTV - Free Report) currently holds a Zacks Rank #2 (Buy) and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Earnings for 2023 are expected to grow 39% while revenues are anticipated to gain 14.8% from the year-ago figure. APTV has a trailing four-quarter earnings surprise history of 13.4%.
Clean Harbors (CLH - Free Report) has a Zacks Rank #2 and carries a VGM Score of A. Earnings for 2023 are expected to be slightly down year over year while revenues are anticipated to increase 5.3% year over year. CLH has a trailing four-quarter earnings surprise history of 13%.
Verisk Analytics (VRSK - Free Report) carries a Zacks Rank #2. Earnings for 2023 are expected to grow 14% while revenues are anticipated to fall 8.3% from the year-ago figure. VRSK has a trailing four-quarter earnings surprise history of 9.9%.