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New Xerox prepares for big product launch

Xerox Corp. is planning its largest product launch in the company’s history in 2017, its new leader recently said.

Jeff Jacobson, who became CEO at the beginning of the year, said the company is also on track to deliver an annual average of at least $500 million in cost savings from 2016 to 2018. In 2016, Xerox exceeded that target by delivering $550 million in gross savings, he reported.

“We are an energized team committed to our strategy and focused on driving strong results,” Jacobson said during a conference call last week to discuss financial results.

Xerox leaders did not give specifics on new products, but they expect to see equipment sales revenue grow in the second half of the year.

Xerox generated $462 million in cash flow from continuing operations during the fourth quarter and ended 2016 with a cash balance of $2.2 billion, which includes $1 billion of cash expected to be used for the repayment of maturing senior notes in the first quarter, the company reported.

The company expects to generate operating cash flow from continuing operations of $700 million to $900 million and free cash flow from continuing operations of $525 million to $725 million in 2017.

The business reported net income attributable to Xerox of $181 million, or 17 cents a diluted share, versus net income of $260 million, or 25 cents a diluted share, in the prior year’s quarter.

Excluding special charges, earnings per share for the most recent quarter were 25 cents.

Analysts polled by Zacks Investment Research expected Xerox to report earnings per share of 25 cents.

The company logged revenues of $2.7 billion in the quarter, down 7.2 percent from sales of $2.9 billion the prior year.

David Holt, an equity analyst with CFRA Research, is maintaining a buy on Xerox stock following the news, while maintaining a 12-month price target at $9 a share.

“We think results from Xerox’s ongoing initiatives could be back-end loaded in 2017, but still see current goals as attainable,” Holt wrote in a research note.

Xerox shares (NYSE: XRX) were trading this week near $7.10.

Xerox announced earlier this year the completion of its separation into two publicly traded companies: Xerox and Conduent Inc. Xerox consists of the company’s document technology business; Conduent is a business process services company.

Timothy Feeney, an analyst with Morningstar Inc., wrote in a research note following the split that he believes Xerox is in a much better position to improve its margin profile with Conduent operating as a stand-alone entity.

“In our view, the company’s decision to split its business process outsourcing operations from its printing business will simplify the decision-making process regarding which areas to focus on, while enabling the company to concentrate on improving revenue growth, margin expansion and disciplined investments in attractive growing markets,” Feeney wrote.

He added, however, the future of the company’s printing equipment business is bleak, as mobile devices serve as an alternative to print.

For the year, Xerox reported sales of $10.8 billion, down 6 percent from sales of $11.5 billion in 2015. Net income attributable to Xerox was $616 million, or 58 cents a share, down from net income of $848 million, or 78 cents a share. Adjusted earnings per share for 2016 were 88 cents.

During the year, Xerox recorded separation costs of $159 million. In 2017, the company expects to incur separation costs of some $15 million.

For 2017, Xerox expects earnings from continuing operations of 44 to 52 cents a share; adjusted earnings per share are expected to be 80 to 88 cents.

Conduent (NYSE: CNDT) is slated to release its fourth-quarter and year-end financial results on Feb. 22.

In Monroe County, Xerox employs some 5,500 workers; Conduent has slightly more than 600 local employees.

2/10/2017 (c) 2017 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.



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