Xerox Q2 Profit Rises, Revenue Down 4%; Reiterates 2016 Adj. Earnings Guidance

(RTTNews) - Xerox (XRX) reported second-quarter adjusted EPS of $0.30, a 7 cent increase over the same period last year driven by a lower tax rate, fewer shares, and higher operating profits. On average, 11 analysts polled by Thomson Reuters expected the company to report profit per share of $0.25 for the quarter. Analysts' estimates typically exclude special items. Second-quarter income from continuing operations available to shareholders increased year-over-year to $149 million from $101 million. Earnings per share from continuing operations was $0.15 compared to $0.09.

Second-quarter total revenue was $4.39 billion, down 4 percent year-over-year in actual and constant currency. Analysts expected revenue of $4.39 billion, for the quarter. The Services business delivered $2.5 billion in revenue, a decrease of 2 percent or 1 percent in constant currency. The Document Technology business delivered total revenue of $1.8 billion, down 7 percent or 6 percent in constant currency.

Xerox generated cash flow from operations of $177 million during the second quarter and ended the quarter with a cash balance of $1.2 billion. The company continues to anticipate full-year 2016 cash flow from operations of $950 million to $1.2 billion and free cash flow of $600 to $850 million.

Xerox reiterated full-year guidance for GAAP EPS of $0.45 to $0.55. Adjusted EPS guidance continues to be $1.10 to $1.20 per share. Analysts polled by Thomson Reuters expect the company to report profit per share of $1.09. For third-quarter 2016, Xerox expects GAAP EPS of $0.14 to $0.16 per share and adjusted EPS of $0.26 to $0.28. Analysts polled by Thomson Reuters expect the company to report profit per share of $0.28.

Xerox reported significant progress on its plan to separate into two independent, publicly traded companies. The separation remains on track to be completed by year-end. The company now expects to incur one-time separation costs of $175 to $200 million pre-tax, which is lower than its previous estimate of $200 to $250 million. Xerox also announced that tax-related separation costs are estimated to be $40 to $50 million. The company expects dis-synergy costs of $40 to $50 million in 2017, which will be more than offset by cost savings from the strategic transformation program.

Xerox said it has made continued progress on three-year strategic transformation program to deliver $2.4 billion in total cost savings from ongoing and incremental productivity and cost reduction initiatives across its businesses. The company is on track to realize the approximately $700 million in annualized savings it targeted for 2016. Estimated restructuring and related charges continue to be approximately $300 million for 2016.