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Xerox (XRX)
NASDAQ:XRX
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Xerox
(NASDAQ:XRX)
43Neutral
Positive Factors
Acquisition
Xerox announced a definitive agreement to acquire Lexmark for $1.5 bn, which appears on the surface to be the acquisition of a better managed company in Core Print and with more attractive exposure to growth markets and better channel presence.
Financial Performance
Acquisition to accelerate path towards double-digit operating margins, given higher margins and robust synergies from Lexmark.
Growth Opportunities
There is an opportunity for Xerox to drive a more optimistic outlook with demonstrated growth in Digital & IT Services, including the recent acquisition of ITsavvy.
Negative Factors
Dividend Policy
Cutting the dividend, which has always been key for value investors in the shares, is seen as a negative aspect of the acquisition.
Market Challenges
Xerox continues to face structural headwinds in the Print market, which are greater than envisioned by company management.
Workforce and Product Challenges
Lower workforce productivity, delayed product launches, and competitive headwinds pressured results across all 3 revenue segments.
Xerox (XRX) vs. S&P 500 (SPY)
Market Cap
$496.11M
Dividend Yield22.09%
Average Volume (3M)5.82M
Price to Earnings (P/E)―
Beta (1Y)1.73
Revenue Growth-9.70%
EPS Growth-5576.16%
CountryUS
Employees16,800
SectorTechnology
Sector Strength51
IndustryInformation Technology Services
Share Statistics
EPS (TTM)-10.74
Shares Outstanding125,281,395
10 Day Avg. Volume5,841,224
30 Day Avg. Volume5,815,568
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.11
Price to Cash Flow (P/CF)0.50
P/FCF Ratio0.50
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$8.00Price Target Upside102.02% Upside
Rating ConsensusHold
Number of Analyst Covering1
Xerox Business Overview & Revenue Model
Company DescriptionXerox Holdings Corporation, a workplace technology company, designs, develops, and sells document management systems and solutions in the United States, Europe, Canada, and internationally. It offers workplace solutions, including desktop monochrome, and color and multifunction printers; digital printing presses and light production devices, and solutions; and digital services that leverage workflow automation, personalization and communication software, content management solutions, and digitization services. The company also provides graphic communications and production solutions; and IT services, end user computing devices, network infrastructure, communications technology, and a range of managed IT solutions, such as technology product support, professional engineering, and commercial robotic process automation. In addition, it provides FreeFlow a portfolio of software solutions for the automation and integration to the processing of print job comprises file preparation, final production, and electronic publishing; XMPie, a personalization and communication software that support the needs of omni-channel communications customers; DocuShare, a content management platform to capture, store, and share paper and digital content; and CareAR, an enterprise augmented reality business. Further, the company sells paper products and wide-format systems. The company sells its products and services directly to its customers through its direct sales force, as well as through independent agents, dealers, value-added resellers, systems integrators, and e-commerce marketplaces. Xerox Holdings Corporation was founded in 1906 and is headquartered in Norwalk, Connecticut.
How the Company Makes MoneyXerox generates revenue through the sale and leasing of its printing and copying equipment, as well as through providing managed print and document services. A significant portion of its income is derived from long-term service contracts and maintenance agreements associated with its hardware products. The company also earns money from the sale of consumables such as toner and paper. Furthermore, Xerox has strategic partnerships and collaborations that enhance its service offerings in areas like IT services and digital transformation, contributing to its earnings. These diverse revenue streams enable Xerox to maintain a stable financial position in a dynamic market landscape.
Xerox Financial Statement Overview
Summary
Xerox is facing significant financial challenges with declining revenues, negative profitability, and high leverage. The income statement shows substantial profitability issues and a sharp revenue drop. The balance sheet reveals high debt levels, but positive cash flows provide some resilience. However, the negative growth trends and financial instability pose substantial risks.Income Statement
Xerox's income statement for TTM shows a significant decline in performance with a sharp drop in revenue and a substantial negative net income, leading to negative profit margins. Gross profit margin is approximately 41.8%, but the net profit margin is deeply negative at -21.3%, indicating serious profitability issues. The EBIT and EBITDA margins are also negative, reflecting challenges in operational efficiency. The revenue growth rate has decreased by about -9.65% from the previous year, highlighting declining sales.32
Negative
Balance Sheet
The balance sheet reveals a concerning debt-to-equity ratio of approximately 3.15, indicating high leverage. The equity ratio is low at around 12.9%, suggesting a significant reliance on liabilities. Return on equity is negative due to net losses. The declining stockholders' equity over the years is a potential risk, but cash reserves provide some liquidity cushion.45
Neutral
Cash Flow
Xerox's cash flow from operations remains positive, with an operating cash flow to net income ratio of -0.39, reflecting some ability to generate cash despite net losses. Free cash flow growth rate has turned negative compared to the previous year; however, free cash flow remains positive, indicating some operational cash efficiency. The free cash flow to net income ratio is substantial, emphasizing cash generation even in challenging times.55
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 6.22B | 6.89B | 7.11B | 7.04B | 7.02B | Gross Profit |
| 4.66B | 2.31B | 2.32B | 2.40B | 2.63B | EBIT |
| -1.22B | 7.00M | 689.00M | 1.14B | 519.00M | EBITDA |
| -823.00M | 307.00M | 47.00M | -46.00M | 718.00M | Net Income Common Stockholders |
| -1.32B | 1.00M | -325.00M | -458.00M | 192.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 576.00M | 519.00M | 1.04B | 1.84B | 2.63B | Total Assets |
| 8.37B | 10.01B | 11.54B | 13.22B | 14.74B | Total Debt |
| 3.40B | 3.46B | 3.73B | 4.25B | 4.44B | Net Debt |
| 2.82B | 2.94B | 2.68B | 2.41B | 1.82B | Total Liabilities |
| 7.06B | 7.24B | 8.18B | 8.56B | 8.93B | Stockholders Equity |
| 1.08B | 2.75B | 3.34B | 4.65B | 5.81B |
| Cash Flow | Free Cash Flow | |||
| 511.00M | 649.00M | 102.00M | 561.00M | 474.00M | Operating Cash Flow |
| 511.00M | 686.00M | 159.00M | 629.00M | 548.00M | Investing Cash Flow |
| -198.00M | -5.00M | -78.00M | -85.00M | -246.00M | Financing Cash Flow |
| -271.00M | -1.20B | -822.00M | -1.31B | -416.00M |
Xerox Technical Analysis
Negative
3.96
Price Trends
6.20
Negative
7.36
Negative
8.52
Negative
Market Momentum
-0.56
Negative
22.02
Positive
6.55
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For XRX, the sentiment is Negative. The current price of 3.96 is below the 20-day moving average (MA) of 4.82, below the 50-day MA of 6.20, and below the 200-day MA of 8.52, indicating a bearish trend. The MACD of -0.56 indicates Negative momentum. The RSI at 22.02 is Positive, neither overbought nor oversold. The STOCH value of 6.55 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for XRX.
Xerox Risk Analysis
Xerox disclosed 26 risk factors in its most recent earnings report. Xerox reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Xerox Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $629.94M | 17.08 | 13.58% | 3.35% | 3.26% | -0.41% | |
68 Neutral | $986.76M | 16.29 | 6.35% | ― | -0.13% | 263.78% | |
57 Neutral | $19.95B | 9.66 | -12.05% | 2.76% | 5.40% | -24.89% | |
57 Neutral | $668.47M | ― | -6.09% | ― | ― | ― | |
45 Neutral | $267.93M | ― | 192.24% | ― | -0.35% | 55.51% | |
43 Neutral | $496.11M | ― | -65.36% | 22.09% | -9.70% | -5576.16% | |
42 Neutral | $344.70M | 0.95 | 48.63% | ― | -9.83% | ― |
* Technology Sector Average
Performance Comparison
XRX
Xerox
3.96
-10.89
-73.33%
MGIC
Magic
13.12
1.76
15.49%
UIS
Unisys
3.83
-1.65
-30.11%
VRNT
Verint Systems
15.88
-13.46
-45.88%
CNDT
Conduent
2.04
-1.13
-35.65%
CGNT
Cognyte Software
9.46
2.84
42.90%
Xerox Earnings Call Summary
Earnings Call Date: Jan 28, 2025 | % Change Since: -58.18% | Next Earnings Date: Apr 29, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted significant organizational changes and acquisitions aimed at stabilizing revenue and improving operational efficiency. However, the company faced challenges with declining revenue, lower earnings per share, and reduced free cash flow. While there were positive advancements in digital and IT services, the overall sentiment is tempered by the financial downturns and challenges in core revenue areas.Highlights
Successful Organizational Changes
Xerox executed a critical phase of reinvention by shifting to a business unit-led operating model, realigning the sales organization, and centralizing key business processes within the Global Business Service Organization.
Acquisition of ITsavvy and Lexmark
Xerox acquired ITsavvy and announced the acquisition of Lexmark, which are expected to stabilize revenue and improve operating margins.
Reinvention Cost Savings
Achieved $200 million of gross reinvention cost savings in 2024, with total company operating expenses declining close to 12%.
Growth in Digital and IT Services
Continued growth in digital and legacy-managed IT services, contributing to a shift in revenue mix towards markets with higher growth rates.
Improved Sales Force Productivity
20% sequential improvement in sales force productivity in Q4 2024.
Debt Refinancing and Liquidity Improvement
Improved liquidity by extending the maturity of unsecured debt obligations and announced the acquisition of Lexmark to reduce debt leverage.
Lowlights
Decline in Full-Year Revenue
Revenue decreased by 9.7% in actual currency and 9.5% in constant currency for 2024.
Lower Adjusted EPS and Free Cash Flow
Adjusted EPS was $0.97, $0.85 lower year-over-year. Free cash flow was $467 million, $182 million lower year-over-year.
Decline in Equipment Revenue
Core organic revenue declined around 4% in 2024, mainly due to modest market share losses in equipment and lower page volumes.
Higher Operating Expenses in Q4
Adjusted gross margin declined 190 basis points year-over-year due to a higher mix of entry A4 equipment and lower print volumes.
Guidance for 2025
Revenue is expected to grow low single digits, with a continued decline in organic core revenue, albeit at a lower rate than in 2024.
Company Guidance
During the call, Xerox Holdings Corporation provided guidance for 2025, highlighting several key metrics and strategic initiatives. The company expects revenue to grow at a low single-digit rate in constant currency, with approximately a 4% headwind from ongoing reinvention actions. Adjusted operating income margin is anticipated to be at least 5%, showing slight year-over-year improvement. Free cash flow for 2025 is projected to range from $350 million to $400 million, primarily impacted by reduced inflow from finance receivable sales and improvements in operating margin and working capital. Xerox plans to continue its reinvention strategy, aiming to realize more than $100 million in gross cost savings, while also integrating recent acquisitions like ITsavvy and preparing for the pending acquisition of Lexmark. The strategic focus includes optimizing commercial operations, leveraging technology-driven efficiencies, and enhancing revenue mix with higher growth rates from digital services and IT solutions.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.