It has been about a month since the last earnings report for Xerox Holdings Corporation (XRX Quick QuoteXRX - Free Report) . Shares have lost about 3.1% 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 due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Xerox Misses Q1 Earnings Estimates

Xerox reported dismal first-quarter 2024 results, wherein both earnings and revenues missed the Zacks Consensus Estimate.

First quarter adjusted EPS of 6 cents missed the Zacks Consensus Estimate by 84.2% and declined more than 87.8%% year over year. Total revenues of $1.5 billion missed the consensus mark by 4.8% and decreased 12.4% year over year on a reported basis. Revenues declined 13.2% on a constant-currency (CC) basis.

Revenue Details

Post-sale revenues came in at $1.2 billion, down 8.5% year over year on a reported basis and 9.3% on a constant currency basis, and surpassing our estimate of $1.19 billion. The decline was mainly due to reductions in non-strategic, lower margin paper and IT endpoint device placements, impacts of geographic simplification, the termination of the Fuji Royalty and the absence of PARC revenue.

Equipment sales declined 25.8% year over year on a reported basis and 26.3% at cc to $290 million, lagging our estimate of $394.7 million. The decline was due to the prior-year effect of backlog reduction and geographic simplification.

Print and Other segment’s revenues totaled $1.43 billion, down 12.6% year over year. Xerox Financial Services revenues totaled $91 million, down 10.8% year over year.

Sales revenues totaled $523 million, down 20.6% year over year on a reported basis and 21.3% at cc. Services, maintenance and rental revenues totaled $937 million, down 6.7% year over year on a reported basis and 7.4% at cc. Financing revenues of $42 million decreased 19.2% year over year on a reported basis and 20.8% at cc.

Operating Performance

Adjusted operating income came in at $33 million, down 72% on a year-over-year basis. Adjusted operating margin came in at 2.2%, up 470 basis points year over year.

Kay Balance Sheet and Cash Flow Figures

Xerox exited the quarter with a cash and cash equivalent balance of $685 billion compared with $519 million at the end of the prior quarter. The company’s operating cash outflow and free cash outflow were $79 million and $89 million, respectively, in the quarter.

2024 Guidance

Xerox expects its 2024 revenues to decline 3% to 5% on a constant currency basis, adjusted operating margin to be at least 7.5%, and free cash flow of at least $600 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -7.14% due to these changes.

VGM Scores

At this time, Xerox has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Xerox has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.