What's in the Offing for Xerox (XRX) This Earnings Season?

Xerox Corporation XRX is scheduled to report third-quarter 2017 results before the opening bell on Oct 26. In the last reported quarter, the company’s adjusted earnings beat the Zacks Consensus Estimate by 3 cents. Over the trailing four quarters, it delivered a negative average earnings surprise of 0.7%, beating estimates only once.

Let’s see how things are shaping up prior to this announcement.

Key Factors in the Quarter

During the quarter, Xerox collaborated with Innovation Lab to counter healthcare challenges. The collaboration intends to seek new products, ideas, and concepts that can be commercialized through the Innovation Lab by working in unison with physicians, employees, and industry partners. This is likely to augment Xerox’s revenues and strengthen its position in the market.

Xerox is reprioritizing investments and accelerating its restructuring actions and services to improve revenues and margins. As part of the restructuring, it is executing a three-year strategic transformation program which targets incremental savings of $600 million across all segments. When combined with savings from cost streamlining actions currently in process, Xerox is attempting to realize cumulative cost reduction of $2.4 billion over the next three years.

The company also remains committed to its five-plank strategy that is centered on portfolio management, global growth, cost transformation, operational excellence and analytics. With sustained investments to expand geographical footprint and build its services capabilities in areas that provide significant customer value, Xerox expects to reap benefits in the long run.

However, advancements in IT have resulted in the replacement of the traditional means of sending and storing information with the digital media. As a result, Xerox is grappling with decreased demand for paper-related systems and products while its attempts to leverage the business process outsourcing market failed to lend growth momentum.

Earnings Whispers

Our proven model does not conclusively show that Xerox is likely to beat earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% with both pegged at 79 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Xerox Corporation Price and EPS Surprise

 

Xerox Corporation Price and EPS Surprise | Xerox Corporation Quote

Zacks Rank: Xerox has a Zacks Rank #4 (Sell).

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Applied Materials, Inc. AMAT has an Earnings ESP of +0.37% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Franklin Resources, Inc. BEN has an Earnings ESP of +0.56% and a Zacks Rank #2.

KEMET Corporation KEM has an Earnings ESP of +7.46% and a Zacks Rank #1.

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