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Xerox's (XRX) Q4 Earnings Surpass Estimates, Increase Y/Y

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Xerox (XRX - Free Report) reported strong fourth-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of $1.33 beat the consensus mark by 30.4% and increased year over year. Total revenues of $2.44 billion surpassed the consensus mark by 3.2% but declined year over year on a reported as well as constant-currency (cc) basis.

Shares of the company have gained 44.2% over the past year, outperforming the 34.6% growth of the industry it belongs to.

Revenues by Segment

Equipment sales totaled $616 million, which declined 2.1% year over year on a reported basis and 1.5% at cc. The segment contributed 25% to total revenues.

Post sale revenues of $1.83 billion declined 2.2% year over year on a reported basis and 1.7% at cc. The segment contributed 75% to total revenues.

Revenues by Region

Revenues from Americas came in at $1.56 billion, down 3.4% year over year on a reported basis and 3.3% at cc. The region contributed 64% to total revenues.

EMEA revenues amounted to $756 million, down 8.9% year over year on a reported basis and 7.4% at cc. The region contributed 31% to total revenues.

Revenues from Other region totaled $126 million, compared with $51 million reported in the year-ago quarter. The region contributed 5% to total revenues.

Xerox Corporation Revenue (TTM)

Operating Performance

Adjusted operating profit of $411 million rose 16.8% year over year. Adjusted operating margin improved 270 basis points (bps) year over year to 16.8%.

Selling, administrative and general expenses, as a percentage of revenues, declined to 20.9% from 22.1% reported in the year-ago quarter. Research, development and engineering expenses, as a percentage of revenues, came in at 3.8%, flat year over year.

Balance Sheet and Cash Flow

Xerox exited the fourth quarter with cash, cash equivalents and restricted cash balance of $2.8 billion compared with $979 million at the end of the prior quarter. Long-term debt was $3.23 billion at the end of the quarter.

The company generated $398 million of cash from continuous operations and capex was $17 million in the reported quarter. Free cash flow was $381 million. Xerox paid out $60 million in dividends in the quarter.

2020 Guidance

Xerox expects adjusted EPS in the range of $3.6 to $3.7, higher than the current Zacks Consensus Estimate of $3.37. Revenues are expected to decline roughly 4% at cc.

Adjusted operating margin is expected to be around 13%. The company expects free cash flow of approximately $1.2 billion and operating cash flow of roughly $1.3 billion.

Zacks Rank & Other Stocks to Consider

Currently, Xerox carries a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks in the broader Zacks Business Services sector are Waste Management WM, S&P Global SPGI and Fidelity National Information ServicesFIS, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings (three to five years) growth rate for Waste Management, S&P Global and Fidelity National Information Services is estimated at 8.2%, 10% and 8.9%, respectively.

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