The document equipment company reported last month fourth-quarter earnings of $375 million, or 26 cents a share, an increase from year-earlier earnings of $171 million, or 12 cents.
"We believe the stock is weak because of 4Q11 results being at the low end of the company's guidance, significant reduction in 2012 outlook, and perception that Xerox lacks exciting growth opportunities," Gabelli analysts wrote in a Jan. 26 report. "While we don't see near-term upsides, we believe Xerox can continue to demonstrate its robustness in terms of at least single digit growth in top line and stable operating cash flow generation. We are maintaining our long-term BUY recommendation on Xerox."Shares of Xerox were upgraded to buy from hold on Thursday by TheStreet Ratings. "The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income, attractive valuation levels, notable return on equity and largely solid financial position with reasonable debt levels by most measures," TheStreet Ratings wrote. "We feel these strengths outweigh the fact that the company shows low profit margins." Xerox has an estimated price-to-earnings ratio for next year of 6.67; the average for electronic and office equipment companies is 7.77. For comparison, Pitney Bowes (PBI) has a forward P/E of 8.88. Of the 12 analysts who cover Xerox, six rated it a buy. Five analysts gave it a hold rating and one rated it a sell. TheStreet Ratings gives Xerox a B grade with a $9.67 price target. The stock closed Wednesday at $8.33 and has risen 4.65% year to date.
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