Xerox profit beats estimates as cost cuts begin to pay off

The company, which is splitting to separate its printer business from its business process outsourcing unit, said it slashed about 1,300 jobs globally in the second quarter.

Xerox’s total costs declined 6 percent to $4.24 billion. This included restructuring and related charges of $71 million, less than the $100 million the company had estimated in April.

Shares of Xerox, which said it was on track to meet its annualized cost savings target of about $700 million for 2016, rose nearly 4 percent in early trading on Friday.

Xerox said it expected one-time pretax separation costs of $175 million-$200 million, lower than the $200 million-$250 million it had estimated earlier.

The company had about 131,800 employees as of June-end, down about 11,800 from the end of December.

Xerox’s total revenue fell for the sixth straight quarter as corporate customers reduce printing to reduce expenses and consumers shift to mobile devices.

Like rivals Lexmark International Inc  and Hewlett-Packard Co , the company is focusing on its software and service businesses.

“Document technology revenue declines moderated and margin improved, driven by cost and productivity initiatives,” Chief Executive Ursula Burns said.

Revenue from Xerox’s document technology business, which includes printers and copiers, fell nearly 7 percent but the decline slowed from 10-13 percent in the prior four quarters.

The business is Xerox’s biggest, accounting for about 40 percent of total revenue.

Revenue from its business process outsourcing unit fell nearly 4 percent. However, revenue rose about 1 percent in its document outsourcing business, the sole bright spot for the company.

WEAK FORECAST

Xerox forecast adjusted earnings of 26-28 cents per share for the third quarter, largely below the average analyst estimate of 28 cents, according to Thomson Reuters I/B/E/S.

Net income from continuing operations jumped 45 percent to $155 million, or 15 cents per share, in the quarter ended June 30.

Excluding items, Xerox earned 30 cents per share, beating the average analyst estimate of 25 cents.

Revenue declined 4.5 percent to $4.39 billion, in line with the average estimate.

Xerox shares were up 3.6 percent at $10.24 in morning trading. Up to Thursday’s close, the stock had risen about 7 percent since Jan. 28, a day before the company announced the split.

Source: Reuters