Xerox shares have dropped on Monday morning after the printer and copier behemoth posted that its profits in the first quarter had plunged by 84% and its revenue dropped by 4% amidst the continued weakness of foreign currencies against the US dollar and more restricting costs. It expects to file the initial Form 10 in July 2016, in order to complete the process by the year end.
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“It has become increasingly clear that the document technology and BPO businesses serve distinct client needs, have different growth drivers, and require customized operating models and capital structures”.
The company said in February it would split into two companies, one holding its legacy printer operations and the other its business process outsourcing unit.
For second-quarter 2016, Xerox expects GAAP earnings per share to be in the range of $0.06 to $0.08 and adjusted earnings per share of $0.24 to $0.26. Net revenue of $4.28 billion for the period topped the Street’s $4.24-billion expectation, but was down nearly 4% year-over-year (YoY) on the back of a stronger dollar.
Revenues from major European currencies and the Canadian dollar comprise roughly 24% of Xerox’s total consolidated revenues, and those currencies were approximately 4% weaker against the US dollar compared with last year’s first quarter, the company said. Xerox said it is aligning its full-year GAAP EPS and cash flow guidance to reflect separation costs and higher restructuring and related costs.
Analysts polled by Reuters had expected a profit of 23 cents per share and revenue of $4.24bn.
Shares of Xerox fell 11% to $9.95 in morning trading in NY as the company also issued downbeat guidance for the current quarter and lowered its bottom line outlook for the year.
Revenue in the Document Technology business came in at $1.6 billion, down 10% (down 9% in constant currency).
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Chief Executive Ursula Burns said in prepared remarks that the company had accelerated its cost-cutting efforts amid declining revenue in the document technology segment, which she said had been pressured in the quarter with weak developing markets. Analysts project second-quarter earnings of $0.26 per share. 1st Global Advisors Inc. now owns 38,255 shares of the company’s stock valued at $407,000 after buying an additional 3,185 shares during the period. For Q2 Xerox expects adjusted EPS of $0.24 to $0.26, below to in line with the Street projection of $0.26.Shares of XRX are at $11.17 within a 52-week range of $8.48 – $12.23. The company, which also lowered its cash-flow forecasts, said the moves reflected separation and higher restructuring-related costs. Xerox also projects full year cash flow of $950 million to $1.2 billion, lower than the $1.3 billion to $1.5 in the company’s earlier guidance.
