Xerox Shares Gain After Profit Tops Estimates
Xerox Corp. (XRX), the provider of document and business services, rose the most in three weeks as earnings beat analyst projections, thanks to a shift away from the traditional printing business.
Profit excluding some items fell to 30 cents a share from 33 cents a year earlier, above the average analyst estimate of 29 cents. Xerox, based in Norwalk, Connecticut, reiterated its full-year forecast for earnings per share of 94 cents to $1, and adjusted profit of $1.09 to $1.15.
Xerox climbed 2.2 percent to $7.75 at the close in New York, the most since Jan. 2. The shares slipped 14 percent last year, compared with a 13 percent gain in the Standard & Poor’s 500 Index.
Xerox has been automating payments for governments and processing claims for insurers in a bid to expand its services business to two-thirds of revenue by 2017, from about half today. Chief Executive Officer Ursula Burns is moving away from printing as customers increasingly view their documents on computers and mobile devices.
“I like the move to services, and they need to show that they can grow there even with increasing competition,” said Dylan Cathers, an analyst with S&P Capital IQ (KCE) in New York, who has a sell rating on the stock. “The printer business is a shrinking business -- there’s no two ways about it.”
Fourth-quarter net income fell to $335 million from $375 million a year earlier, Xerox said. Sales were $5.92 billion, compared with $5.96 billion a year earlier.
Fourth-quarter earnings were hurt by $93 million for restructuring costs as Xerox fired 2,500 workers. Competitors including Computer Sciences Corp. (CSC) and Accenture Plc (ACN) are getting more aggressive, making Burns’s strategic plan tougher, Cathers said. Printer maker Lexmark International Inc. (LXK) is also working on a move to services.
International Business Machines Corp. (IBM), the market leader, said this week that fourth-quarter contract signings for services fell 12 percent from a year earlier to $17.9 billion, while outsourcing bookings were down 28 percent to $8.3 billion.
Mark Loughridge, IBM’s chief financial officer, said sales in the consulting unit known as Global Business Services will improve this year after falling 4 percent to $18.6 billion in 2012.
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