Xerox Q1 Profit Declines, But Meets View; Trims 2015 Outlook Once Again

(RTTNews) - Document technology and business process services provider Xerox Corp. (XRX) on Friday reported a 20 percent decline in profit for the first quarter from last year, reflecting lower revenues and margins amid currency headwinds. However, adjusted earnings per share from continuing operations matched analysts' expectations.

Looking ahead, the company provided earnings forecast for the second quarter below Street view and again trimmed its fiscal 2015 outlook, saying it expects increased currency headwinds, softer signings and acquisition timing to impact revenue.

Chairman and CEO Ursula Burns said, "Results in Document Technology, which included the increased impact from foreign currency, largely met our expectations. Several of our Services businesses performed well, but overall Services segment results fell short of our expectations driven by higher implementation costs in certain Health Enterprise platform accounts."

The Norwalk, Connecticut-based company reported net income for the first quarter of $225 million or $0.19 per share, down from $281 million or $0.23 per share in the prior-year quarter.

Excluding items, adjusted income from continuing operations was $239 million or $0.21 per share, compared to $314 million or $0.26 per share in the same period last year.

On average, ten analysts polled by Thomson Reuters expected the company to earn $0.21 per share for the quarter. Analysts' estimates typically exclude special items.

Total revenues for the quarter declined 6 percent to $4.47 billion from $4.77 billion in the same quarter last year. Analysts' consensus revenue estimate was $4.56 billion.

The decline in revenues include a 4-percentage point negative impact from currency due to the stronger U.S. dollar.

Sales revenues for the quarter declined 10 percent from the prior-year quarter to $1.13 billion, while outsourcing, maintenance and rental revenues declined 5 percent from a year ago to $3.25 billion. Financing revenues also decreased 10 percent to $90 million.

Services revenues, which represents the company's business process, IT and document outsourcing offerings and accounts for 56 percent of total revenue, declined 3 percent from the year-ago period to $2.5 billion.

Revenues from document technology, which represents the sale of document systems as well as the supplies, technical service and financing of products, declined 10 percent from last year to $1.8 billion.

Total costs and expenses declined 5 percent from the year-ago period to $4.27 billion.

Operation margin declined 1.1 percentage points from the year-ago period to 7.6 percent, while gross margin decreased 0.3 percentage points to 31.2 percent.

Looking ahead, Xerox said it expects services margin to be impacted by increased implementation costs in legacy Health Enterprise accounts.

For the second quarter, Xerox expects reported earnings of $0.17 to $0.19 per share and adjusted earnings in a range of $0.21 to $0.23 per share. Analysts expect the company to report earnings of $0.25 per share for the quarter.

For fiscal 2015, Xerox now forecasts reported earnings from continuing operations of $0.77 to $0.83 per share and adjusted earnings in a range of $0.95 to $1.01 per share.

Earlier, the company forecast full-year reported earnings from continuing operations of $0.83 to $0.89 per share and adjusted earnings of $1.00 to $1.06 per share.

Street is currently looking for full-year 2015 earnings of $1.02 per share.

XRX closed Thursday's trading at $13.14. In Friday's pre-market activity, the stock is down $0.59 or 4.49 percent to $12.55.