The Death Of Xerox?

Summary

  • I had a speculative buy on this name if the yield hit 3.5%.
  • The business is in very rough shape and I discuss the most recent results.
  • The company desperately needs a catalyst, which the pending separation may provide.

When I initiated coverage on Xerox (NASDAQ:XRX), I concluded that the stock wasn't dead, and in January, I opined the name was also not "dead money." That is important to reiterate. But this once-stellar blue chip has certainly fallen from grace, big time. I then told you that the company was "not dead yet." But friends, are we approaching the death of Xerox? I mean, it has been struggling for a long time. I suggested on nice dips you could buy simply for the yield and collect the dividend, but growth was nowhere to be found. I had said in my prior work numerous times that we needed to see some improvement in the underlying metrics before I could get behind the name. Well, in the past three months, the stock has moved sideways to higher, but will there be sustained momentum? That is tough to tell, but the name has been downgraded and the most recent earnings were not great.

The truth is that performance has been pitiful of late and is the reason shares have declined. Well here, Q3 shows that there are still declining revenues. Revenue as a whole came in at $4.21 billion, and this missed estimates by $100 million. However, this was also down 5.4% year over year, continuing a string of declining quarters. In addition, the degree of declining revenues seems to be picking up and this is real bad news. Of course, as I have discussed in-depth in other articles, the strong dollar has hurt companies with international businesses.

Thus, we need to look at revenues on a constant dollar basis. Doing so, we still see revenues were down 4% year over year. That is still a huge negative. Revenue from the company's "services" business was $2.4 billion, which was actually up 1% (but down 2% in constant dollars) with margins at 9.2%.

This article was written by

Quad 7 Capital profile picture
37.39K Followers
The #1 service for high performing trades run by active hedge fund analysts

We have turned thousands of losing investors into WINNERS. We are the team behind the top performing trading service BAD BEAT Investing. Quad 7 Capital was founded in 2017 by a team that consists of a long time investor, health researcher, financial author, professor, professional cardplayer, and a politician. 

The BAD BEAT Investing service launched in 2018 and is a top performing Marketplace service relative to market returns. It is focused on extreme value, and leveraging mispriced stocks and momentum driven events for rapid return swing trades, options education, and long-term investments. Further, it offers a direct access line to our traders all day during market hours.

Quad 7 Capital as a whole has expertise in business, policy, economics, mathematics, game theory and the sciences. The company has experience with government, academia, and private industry. We offer market opinion and analysis, and we cover a wide range of sectors and companies, with particular emphasis on news related items and analyses on growth companies, cryptocurrencies, REITS, biotechnology/ pharmaceuticals, precious metals, blue chips and small-cap companies.

If you want to win, follow us, and if you want to make money, sign up to BAD BEAT investing today. 

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (15)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.