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Xerox (XRX) Earnings Miss Estimates in Q2, Revenues Beat
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Xerox Corporation (XRX - Free Report) reported mixed second-quarter 2018 results, wherein the company’s bottom line lagged the Zacks Consensus Estimate but the top line surpassed the same.
Adjusted earnings per share of 80 cents missed the Zacks Consensus Estimate by 12 cents and declined 6 cents from the year-ago quarter. Total revenues of $2.51 billion outpaced the consensus mark by $1.7 million. The figure was down 2.2% year over year and 4% on a constant currency basis.
So far this year, shares of Xerox have declined 12% against the industry’s rally of 3.6%.
Let’s check out the numbers in detail.
Revenues by Segment
Equipment sales of $561 million went up 0.9% year over year but were down 0.6% on a constant currency basis. The segment accounted for 22% of total revenues.
Post sale revenues of $1.95 billion were down 3.1% year over year or 5% on a constant currency basis. The segment contributed 78% to total revenues.
Revenues from North America came in at $1.51 billion, down 1.3% year over year or 1.8% on a constant currency basis. The region contributed 60% to total revenues.
International revenues came in at $898 million, up 0.3% year over year or down 3.9% on a constant currency basis. The region accounted for 36% of total revenues.
Revenues from Other region came in at $98 million, down 29% year over year as well as on a constant currency basis. The region contributed 4% to total revenues.
Operating Results
Gross profit of $1 billion decreased 4% from the prior-year quarter. Total gross margin declined to 39.9% from 40.6% in the prior-year quarter. While gross margin for Equipment rose to 31.8% from 28.7% in the prior-year quarter, the same for Post sale declined to 42.1% from 43.9% in the prior-year quarter.
Adjusted operating profit of $299 million was down 11.5% year over year. Adjusted operating margin declined to 11.9% from 13.2% in the prior-year quarter.
Selling, administrative and general expenses, as a percentage of revenues, rose from 24.4% in the year-ago quarter to 24.9%.Research, development and engineering expenses, as a percentage of revenues, remained flat at 4%.
Balance Sheet and Cash Flow
Xerox exited second-quarter 2018 with cash and cash equivalents of $1.26 billion compared with $1.39 billion at the end of March 2018. Long-term debt of $4.81 billion was flat with the prior-quarter level.
The company generated $235 million of cash from operating activities in the reported quarter. Free cash flow was $203 million.
During the reported quarter, Xerox returned $68 million in dividends to shareholders. The company’s board of directors approved a $1 billion share repurchase program. It plans to repurchase up to $500 million shares in 2018.
2018 Guidance
Xerox provided its cash flow guidance for the full year. The company expects operating cash flow to be in the range of $900-$1,100 million and free cash flow to be in the range of $750-$950 million. The company plans to utilize 50% of its free cash flow by rewarding its shareholders through dividend payments and share repurchases on an annual basis.
Additional cash on the balance sheet is expected to be used for share repurchases in 2018. 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 second-quarter earnings reports from key players like Verisk Analytics (VRSK - Free Report) , Aptiv (APTV - Free Report) and Fiserv . All the companies are slated to report their quarterly numbers on Jul 31.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Xerox (XRX) Earnings Miss Estimates in Q2, Revenues Beat
Xerox Corporation (XRX - Free Report) reported mixed second-quarter 2018 results, wherein the company’s bottom line lagged the Zacks Consensus Estimate but the top line surpassed the same.
Adjusted earnings per share of 80 cents missed the Zacks Consensus Estimate by 12 cents and declined 6 cents from the year-ago quarter. Total revenues of $2.51 billion outpaced the consensus mark by $1.7 million. The figure was down 2.2% year over year and 4% on a constant currency basis.
So far this year, shares of Xerox have declined 12% against the industry’s rally of 3.6%.
Let’s check out the numbers in detail.
Revenues by Segment
Equipment sales of $561 million went up 0.9% year over year but were down 0.6% on a constant currency basis. The segment accounted for 22% of total revenues.
Post sale revenues of $1.95 billion were down 3.1% year over year or 5% on a constant currency basis. The segment contributed 78% to total revenues.
Xerox Corporation Revenue (TTM)
Xerox Corporation Revenue (TTM) | Xerox Corporation Quote
Revenues by Region
Revenues from North America came in at $1.51 billion, down 1.3% year over year or 1.8% on a constant currency basis. The region contributed 60% to total revenues.
International revenues came in at $898 million, up 0.3% year over year or down 3.9% on a constant currency basis. The region accounted for 36% of total revenues.
Revenues from Other region came in at $98 million, down 29% year over year as well as on a constant currency basis. The region contributed 4% to total revenues.
Operating Results
Gross profit of $1 billion decreased 4% from the prior-year quarter. Total gross margin declined to 39.9% from 40.6% in the prior-year quarter. While gross margin for Equipment rose to 31.8% from 28.7% in the prior-year quarter, the same for Post sale declined to 42.1% from 43.9% in the prior-year quarter.
Adjusted operating profit of $299 million was down 11.5% year over year. Adjusted operating margin declined to 11.9% from 13.2% in the prior-year quarter.
Selling, administrative and general expenses, as a percentage of revenues, rose from 24.4% in the year-ago quarter to 24.9%.Research, development and engineering expenses, as a percentage of revenues, remained flat at 4%.
Balance Sheet and Cash Flow
Xerox exited second-quarter 2018 with cash and cash equivalents of $1.26 billion compared with $1.39 billion at the end of March 2018. Long-term debt of $4.81 billion was flat with the prior-quarter level.
The company generated $235 million of cash from operating activities in the reported quarter. Free cash flow was $203 million.
During the reported quarter, Xerox returned $68 million in dividends to shareholders. The company’s board of directors approved a $1 billion share repurchase program. It plans to repurchase up to $500 million shares in 2018.
2018 Guidance
Xerox provided its cash flow guidance for the full year. The company expects operating cash flow to be in the range of $900-$1,100 million and free cash flow to be in the range of $750-$950 million. The company plans to utilize 50% of its free cash flow by rewarding its shareholders through dividend payments and share repurchases on an annual basis.
Additional cash on the balance sheet is expected to be used for share repurchases in 2018. 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 second-quarter earnings reports from key players like Verisk Analytics (VRSK - Free Report) , Aptiv (APTV - Free Report) and Fiserv . All the companies are slated to report their quarterly numbers on Jul 31.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>