Xerox Q1 Profit Tops View, Revenue Misses; Cuts FY14 Earnings Forecast

(RTTNews) - Document technology and business process services provider Xerox Corp. (XRX) reported Tuesday a decline in first-quarter profit, hurt mainly by charges as well as lower revenues. Adjusted earnings per share topped analysts' estimates, while revenues missed their view. Further, the company trimmed its forecast for fiscal 2014 earnings, citing the increased implementation costs in government healthcare.

In pre-market activity, Xerox shares lost $0.77 or 6.71 percent, and traded at $10.70.

Net income attributable to the company for the first quarter decreased 5 percent to $281 million from $296 million a year ago. Earnings per share, meanwhile, remained flat with last year's $0.23.

The latest results included $0.04 per share related to amortization of intangibles.

Adjusted earnings, which excluded the charge, was $331 million, or $0.27 per share. On average, nine analysts polled by Thomson Reuters expected the company to report earnings of $0.24 per share for the quarter. Analysts' estimates typically exclude special items.

Gross margin was 30.2 percent, down 0.3 points from last year's 30.5 percent mainly due to lower margin at Services segment.

Operating profit increased 13 percent year-over-year to $442 million, and operating margin of 8.6 percent improved 1.1 points year-over-year.

Total revenues, meanwhile, decreased 2 percent to $5.12 billion from $5.20 billion a year ago. Analysts expected revenue of $5.15 billion for the quarter.

In the quarter, equipment sales dropped 1 percent and annuity revenues declined 2 percent.

Revenue from the company's Services business, which represented 57 percent of total revenue, was $2.9 billion, flat with last year. Revenue from Document Technology business, which represented 40 percent of total revenue, was $2 billion, down 4 percent.

Ursula Burns, Xerox chairman and chief executive officer, said, "Good profitability in Document Technology along with strength in document outsourcing and in commercial outsourcing services contributed positively to our results. But these gains were offset by higher-than-anticipated investments in our government healthcare business as we implement new Medicaid and health insurance exchange platforms."

Looking ahead for the second quarter, Xerox expects earnings per share to be between $0.21 to $0.23 per share and adjusted earnings per share to be between $0.25 to $0.27. Analysts expect earnings per share of $0.28.

The company now expects full-year 2014 earnings per share of $0.90 to $0.96 and adjusted earnings per share of $1.07 to $1.13. Previously, the company was projecting reported earnings in the range of $0.93 to $0.99, and adjusted earnings per share of $1.10 to $1.16.

Analysts now expect the company to report full year 2014 earnings per share of $1.13.

Further, Xerox said it is increasing full-year share repurchase expectations to at least $700 million from at least $500 million as its strong cash position enabled a fast start to share repurchase program.

Burns added, "We're focused on driving Services growth and margin improvement by executing on our Five-Plank Strategy and expect the benefits to build through 2014."