Xerox Stock Jumps as Offices Spend More on Documents
Xerox Corp., the largest maker of high-speed color printers, jumped the most in nine months in New York trading after its second-quarter profit forecast beat analysts’ estimates.
Per-share profit this quarter, excluding some costs, will be at least 20 cents, Xerox said today in a statement. That compares with the 18-cent average of estimates compiled by Bloomberg. First-quarter earnings and sales also exceeded analysts’ projections.
Customers are spending more on services to help them manage documents, after curbing budgets during the recession. The rebound, plus a sales boost from the purchase of Affiliated Computer Services Inc., helped Xerox increase sales 33 percent last quarter. Xerox also said today that full-year profit will be at the high end of its forecast.
The earnings report was the first since Chief Executive Officer Ursula Burns completed the $6 billion acquisition of ACS, the largest in Xerox’s history. She aims to transform the printer and copier company into a bigger provider of office- support services. Investors needed assurance that cost savings - -a big selling point for the deal -- are under way, said Deutsche Bank’s Chris Whitmore.
“The business isn’t being hit by the transaction,” said the San Francisco-based analyst, who rates the shares “hold” and doesn’t own them. “That gives people some confidence.”
Xerox said it’s on track to save at least $100 million this year, as projected, and the number may climb to $150 million, the high end of its forecast. The company announced 2,500 job cuts last quarter, leading to an additional $140 million in savings.
“We tried to put out conservative estimates,” Chief Financial Officer Larry Zimmerman said in an interview. “We’ll have to see how it goes, but we’re certainly confident we’re going to get the $100 million.”
Xerox, based in Norwalk, Connecticut, rose 87 cents, or 8.3 percent, to $11.32 at 4 p.m. in New York Stock Exchange composite trading, the biggest increase since July 23.
The first-quarter loss was $42 million, or 4 cents a share, compared with net income of $42 million, or 5 cents, a year earlier. Excluding restructuring and other costs, profit was 18 cents a share, topping the average analyst estimate of 13 cents. Sales climbed to $4.72 billion from $3.55 billion a year earlier.
The company had previously forecast full-year profit of 75 cents to 85 cents. Analysts on average estimated 79 cents, according to a Bloomberg survey.
Burns, 51, took over as CEO in July, when Anne Mulcahy stepped down after eight years at the helm. Burns announced the ACS deal less than three months later, to build Xerox’s services business amid declining sales of printing equipment. ACS handles accounting, benefits and other administrative tasks for corporations.
After the stock dropped 15 percent the day the deal was announced, Burns spent the next five months convincing investors that it could boost services sales and take out costs. When the deal closed Feb. 8, shares had climbed most of the way back, up 10 percent compared with a decline in the Standard & Poor’s 500 in the same period. Xerox has gained 34 percent this year.
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