Xerox Reports First-Quarter Profit on Cost Cutting, Service Revenue Gain
Stock Chart for Xerox Corp (XRX)
Xerox Corp. (XRX), the provider of printers and business services, posted a first-quarter profit as revenue climbed and the company cuts costs from its acquisition of Affiliated Computer Services Inc.
Net income was $281 million, or 19 cents a share, from a loss of $42 million, or 4 cents, a year earlier, Norwalk, Connecticut-based Xerox said in a statement today. Excluding some costs, per-share profit was 23 cents. Analysts estimated 21 cents on average, according to a Bloomberg survey.
Sales climbed 16 percent to $5.47 billion, led by services, which gained almost 30 percent. Sales from equipment and supplies was little changed, which may have disappointed some investors, said Keith Bachman, an analyst at BMO Capital Markets.
“It’s uninspiring,” said New York-based Bachman, who rates the shares “market perform” and doesn’t own them. “It’s a reasonable report, but it doesn’t give anybody a reason to go out and buy the stock.”
Xerox fell 43 cents, or 4 percent, to $10.42 at 1:04 p.m. in New York Stock Exchange composite trading. The shares had fallen 5.8 percent this year before today.
The company has been slashing costs, including 5,000 job cuts last year, as it integrates ACS. The company may save more than $375 million in three years as a result of the takeover, Xerox has said.
Xerox said per-share profit this quarter, excluding some costs, will be 23 cents to 26 cents, a larger range than the company typically gives for its quarterly forecasts as it assesses its business in Japan. That compares with analysts’ average estimate of 25 cents.
The company, whose Fuji Xerox joint-venture manufactures and distributes copiers and printers to Japan, China and other countries in the Asia-Pacific region, said it anticipates last month’s earthquake in Japan to affect its equity income this quarter and the third quarter.
While Fuji Xerox factories weren’t damaged, several of its suppliers were affected by the earthquake, Chief Executive Officer Ursula Burns said. The company is making alternate plans for supplies, and expects to have increased supply chain costs, she said.
“Considering there is still much uncertainty, we’re providing a broader range than usual for our earnings expectation,” Burns said today on a conference call. She added that the company remains “fully committed” to its full-year forecasts.
Services, Equipment Sales
Services sales climbed 27 percent to $3.63 billion last quarter, while revenue from equipment and supplies was little changed at $1.67 billion. Analysts estimated first-quarter sales of $5.42 billion, on average, according to a Bloomberg survey.
The company reiterated its full-year profit forecast of $1.05 to $1.10 a share, also on an adjusted basis.
Xerox completed the $6 billion ACS acquisition, its largest deal, in February 2010, as it aimed to triple its services revenue. Since then, Burns has cut jobs and has been using various ACS services to automate administrative tasks to trim costs.
Xerox plans to repurchase shares starting in the second half of the year, Chief Financial Officer Luca Maestri said today on the conference call, reiterating a goal set last year. The company will spend about 70 percent of its cash, which should total about $1 billion to $1.2 billion, on the buybacks, he said.
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