Technology

Why the Conduent Spin-Off Failed to Lift Xerox Earnings

Paul Ausick

Published: January 31, 2017 11:05 am

Last Updated: January 12, 2020 3:19 pm

When Xerox Corp. (NYSE: XRX) reported fourth-quarter results before markets opened Tuesday, the business technology firm posted adjusted diluted earnings per share (EPS) of $0.25 on revenues of $2.73 billion. In the same period a year ago, the company reported EPS of $0.24 on revenues of $2.95 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.25 and $2.77 billion in revenues.

Full-year adjusted EPS totaled $0.88 and revenues came in at $10.77 billion, compared with 2015 EPS of $0.77 and revenues of $11.47 billion. Analysts were looking for full-year EPS of $0.91 and revenues of $10.79 billion.

Fourth-quarter and full-year results exclude discontinued operations, including the spin-off of Conduent Inc. (NYSE: CNDT) that became effective on December 31, 2016.

For fiscal year 2017, Xerox expects adjusted EPS in the range of $0.80 to $0.88. The company expects full-year operating cash flow of $700 million to $900 million and free cash flow of $525 million to $725 million. Operating cash flow for 2016 totaled $1.02 billion

Adjusted EPS for the full fiscal year is now forecast at $1.11 to $1.24. Consensus estimates called for fourth-quarter EPS of $0.34 and full-year earnings of $1.13. Xerox also expects full-year cash flow from operations of $950 million to $1.2 billion and free cash flow of $600 to $850 million.

CEO Jeff Jacobson said:

With the separation of Conduent now complete, we turn our full attention to delivering on our strategy, which includes pursuing the growing areas of the market. As the strategy begins to yield results, our revenue trajectory is expected to improve over time while we expand our margins and continue to generate strong cash flows.

Xerox shares traded down nearly 4% to $6.68 late Tuesday morning. The stock’s 52-week range is $6.46 to $11.39. The consensus 12-month price target was $8.88 before this morning’s report.