Xerox Holdings Stock Falls 4% Following Q3 Earnings Miss

Xerox Holdings Corporation (XRX) has witnessed a 4% decline in its stock following the release of its third-quarter 2024 financial results. This drop is largely due to disappointing performance in earnings and revenues along with reduced guidance for the future.

In the third quarter, Xerox reported an adjusted earnings per share (EPS) of 25 cents. This figure fell short of the Zacks Consensus Estimate by 52.8% and marked a 45.7% decrease compared to the previous year. The company’s total revenues reached $1.53 billion, which also missed the consensus estimate by 3.6% and reflected a 7.5% decline year over year.

In terms of execution, Xerox reduced its revenue guidance for 2024, now projecting a decline of approximately 10% at constant currency, compared to the earlier estimate of 5% to 6%. Additionally, the adjusted operating margin expectation has been downgraded from a minimum of 6.5% down to around 5%. The expected free cash flow is now forecasted to fall between $450 to $500 million, revised from a previous expectation of at least $550 million.

Details on Q3 Revenue Performance

Breaking down the revenue, post-sale revenues were reported at $1.19 billion, indicating a 6.1% year-over-year decrease on a reported basis and a 5.7% drop on a constant-currency basis. This figure was below the internal estimate of $1.3 billion. Meanwhile, equipment sales showed a more significant drop, plummeting by 12.2% year over year, amounting to $339 million, but still slightly surpassed the internal estimate of $330.3 million.

The Print and Other segment recorded revenues of $1.46 billion, which is a 7.5% decrease year-over-year and fell short of the anticipated $1.55 billion. In addition, Xerox Financial Services generated revenues of $88 million, down 10.2% year-on-year, missing the expected revenue of $96.4 million.

Sales revenue totaled $588 million, denoting an 8.7% year-over-year decrease on a reported basis along with an 8.3% decline on a constant-currency basis. For services, maintenance, and rental revenues, the total came to $902 million, falling by 6.2% year over year. Lastly, financing revenues also decreased significantly, recorded at $38 million, which marked a 17.4% year-over-year decline.

Operating Income and Cash Flow Status

Xerox reported an adjusted operating income of $85 million, reflecting a year-over-year increase of 17.6%. The adjusted operating margin was recorded at 5.2%, which signifies an increase of 110 basis points compared to last year.

At the end of the quarter, Xerox had a cash and cash equivalent balance of $521 million, up from $485 million at the conclusion of the previous quarter. In terms of cash flow, operating cash flow was reported to be $116 million, while free cash flow was $107 million.

Xerox currently holds a Zacks Rank of #5 (Strong Sell), reflecting unfavorable market conditions.

Additional Earnings Insights

In contrast, other companies have reported diverse earnings results. For instance, Omnicom (OMC) announced favorable third-quarter outcomes, with both earnings and revenues surpassing expectations. Additionally, Equifax (EFX) showcased mixed results; while earnings exceeded consensus estimates, total revenues fell short. Similarly, Republic Services, Inc. (RSG) reported results showing strong earnings but a slight miss in revenue expectations.

Xerox, Earnings, Stock