Q4 Preview: Xerox (XRX) May Show Weakness on Tight Margins, Gov't Spending Slowdown

Xerox Corp. (NYSE: XRX) shares closed lower Tuesday heading into its fourth-quarter earnings report Wednesday morning. The stock finished at $8.67, down nearly 0.7 percent from Monday's close.

Xerox should report earnings of 33 cents per share and revs of $6.07 billion. Such earnings would be a 13.8 percent increase from 29 cents per share reported in the same period last year.

Shares gained 14.9 percent in the quarter to $7.96 at the end of December. Shares moved 8.7 percent higher since, but fell 30 percent in 2011. Xerox traded within a range of $6.55 to $11.50 over the last 52-week time frame.

Data from Bloomberg has 6 analysts at Buy, five with a Hold, and one maintaining a Sell rating on Xerox. The Street's price target average is $10.30, with a low of $7 and high of $13.

Analyst Comments

• Goldman Sachs is looking for rev of $5.937 billion and earnings of 31 cents per share. The firm said, "We believe that pressures on Xerox’s imaging market, coupled with a potential drag from Xerox’s high exposure to government spending, could weigh on results in 2012, and we expect a cautious guide a result."
  
  Goldman is bullish on the service segment, but government exposure is a concern (at about 30 percent of total).
  
  Buyback commentary and free cash flow guidance will be critical: "We believe that pressures on Xerox’s imaging market, coupled with a potential drag from Xerox’s high exposure to government spending, could weigh on results in 2012, and we expect a cautious guide a result."
  
  
• Deutsche Bank sees EPS of 33 cents and revs of $6.18 billion. Deutsche commented, "we remain concerned weak equipment sales will negatively impact top line results through soft end market demand and competitive pricing. In the past, weak macro conditions have pressured XRX’s H/W sales given that printers are a relatively low priority IT spending requirement. We expect in-line post sale revenues and in-line ACS results."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Xerox's past performance at Streetinsider's Xerox's Income Statement.

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