Wednesday - Loop Capital has adjusted the stock price target for Xerox Corporation (NASDAQ:XRX) shares, reducing it to $11 from the previous $14 while maintaining a Hold rating. The adjustment follows Xerox's second-quarter earnings report released on July 15, where the company's earnings per share (EPS) fell short of expectations, although revenue matched forecasts.
The investment firm noted that Xerox is repositioning certain aspects of its Reinvention Plan, which is expected to benefit the company's strategic execution in the long term, potentially leading to a revenue increase in calendar years 2025 and 2026. Consequently, Xerox has revised its guidance for calendar year 2024 downward.
Xerox's current year is viewed as a period of strategic realignment, aimed at setting the stage for future revenue growth and operational efficiencies. The company is shifting towards a business unit-led operating model and is strategically poised to enhance its digital and IT services sales to its existing customer base.
The collaboration between sales teams and other internal groups at Xerox is being strengthened to foster more effective customer acquisition strategies. Despite the reduced guidance for the coming year, Xerox remains optimistic about achieving its operating income goal of over $300 million by calendar year 2026. This confidence is supported by progress made to date and the identification of additional cost-saving opportunities.
In other recent news, Xerox Holdings Corporation reported a decline in revenue for both the first and second quarters of 2024, recording $1.5 billion and $1.6 billion respectively. This downturn is attributed to significant structural changes, including a 15% reduction in workforce. Despite these challenges, Xerox remains committed to its reinvention strategy, aiming to improve its adjusted operating income by $300 million above 2023 levels within three years.
In financial developments, the company expanded its credit line from $300 million to $425 million, in partnership with Citibank and other lenders, to bolster its financial flexibility. Furthermore, Xerox's board of directors declared dividends for both its common and preferred stock, with shareholders of the common stock set to receive a quarterly dividend of $0.25 per share, and the preferred stock shareholders, a $20.00 per share dividend.
In analyst notes, JPMorgan has adjusted its outlook on Xerox, reducing the price target to $16 from the previous $17, and maintaining an Underweight rating on the stock. Similarly, Citi initiated coverage on Xerox with a Sell rating, setting a price target of $11.00. These adjustments reflect concerns over Xerox's ability to achieve long-term revenue and earnings growth amidst ongoing major restructuring efforts.
InvestingPro Insights
Investors looking at Xerox Corporation (NASDAQ:XRX) will find a mixed financial landscape, as reflected in recent InvestingPro data. The company's market capitalization stands at a modest $1.27 billion, and its Price / Book ratio as of Q2 2024 is low at 0.54, indicating that the stock may be undervalued relative to its assets. This aligns with one of the InvestingPro Tips, which highlights Xerox's low Price / Book multiple. Moreover, the company's dividend yield is notably high at 9.81%, a testament to its commitment to returning value to shareholders, which has been consistent for 18 consecutive years.
While revenue has seen a decline of 9.27% in the last twelve months as of Q2 2024, Xerox is expected to see net income growth this year, as per another InvestingPro Tip. This may signal potential for recovery and profitability, which could be an important consideration for long-term investors. In addition, despite recent stock price volatility with a steep 42.25% drop over the last six months, analysts predict the company will be profitable this year, an insight that could indicate a turning point for the company.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available, including revised earnings estimates and valuation multiples, which can provide a more comprehensive financial picture of Xerox. Visit InvestingPro for a total of 12 tips that could help in making a more informed investment decision.
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