Citi Assumes Coverage on Xerox (XRX) with a Buy, Sees Long-Term Outperformance

September 2, 2008 8:15 AM EDT

Citi is assuming coverage on Xerox (NYSE: XRX) with a Buy rating from a Hold. Price target raised from $17 to $20.

Citi analyst says, "While operating income is not expected to grow in 2008, we expect growth to resume in 2009, thanks to new Production Color products and strong Office install growth in 2007. Moreover, we believe that lack of growth in op income this year is more than fairly reflected in the current 10.6X F12 P/E. While the shares have underperformed the S&P500 and NASDAQ by 140bp and 330bp ytd, respectively, we look for outperformance during the coming year...Taking a longer-term view, we believe that XRX continues to fire on all cylinders. XRX maintains clear leadership in production and lightproduction color, has gained share in office color for several quarters and has perhaps the most compelling enterprise services portfolio of any company in the market. XRX has reduced debt to capital from 150% in 2003 to less than 50% in 2007 and is spending ~$1B annually on share repurchase."

Xerox Corporation (Xerox) is a technology and services enterprise. The Company develops, manufactures, markets, services and finances a range of document equipment, software, solutions and services.

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