Bear of the day: Xerox Holdings Corporation (XRX)


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This story originally appeared on Zacks

Xerox Holdings Corporation XRX Products have been at the heart of countless offices, schools and beyond for years. But the corporate printer and copier company has struggled as the world becomes increasingly digital.

– Zack

The quick story

Xerox Holdings sells printers, digital scanners, copiers and more with an emphasis on broader enterprise level offerings. The company sells supplies to accompany its equipment. Xerox is also expanding its service unit amid the changing digital landscape.

Xerox’s revenues fell for nearly a decade, and the distant world took a heavy toll on its operations. The company’s revenue for fiscal 2020 fell 23% after falling 6% in 2019. In fact, last year marked its seventh consecutive year of year-over-year sales decline.

Xerox’s sales in the third quarter of FY21 were down only 0.5%. Still, XRX executives lowered their sales forecast amid persistent challenges, including a deterioration in the global supply chain and a much slower-than-expected return to office.

Zacks investment researchImage source: Zacks Investment Research

Final result

Xerox’s consensus estimate of fourth quarter earnings is down 50% from its third quarter report, with its FY21 figure down 16% and FY22 down 9%. Zacks’ estimates call for XRX to show a 1% revenue expansion this year and an additional 2% next year. In addition, its adjusted profits are expected to increase by 6.4% and 37%, respectively.

That said, Xerox currently achieves a Zacks # 5 (strong sell) rank, based on its huge profit downgrades. Additionally, its office supplies space is in the bottom 3% of over 250 Zacks industries.

Xerox’s dividend yield and share price could be attractive to some. But the stock has fallen 40% in the past five years compared to its industry‘s 60% rise. This difficult stretch includes a 40% drop over the past two years. Xerox stocks recently appeared, but it looks like more of a trader’s stock since the digital world was already shrinking its business long before covid.

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