Why Xerox (XRX) Stock Is Up Today

NEW YORK (TheStreet) -- Xerox (XRX) was gaining 4.9% to $12.15 Wednesday after beating analysts' estimates for earnings in the first quarter.

For the first quarter the company posted earnings of 27 cents a share, beating FactSet estimates of 24 cents a share by 3 cents. Revenue fell 1.5% to $5.21 billion, while analysts expected revenue of $5.17 billion.

Looking to the second quarter Xerox now expects earnings of between 25 cents and 27 cents a share, below analysts' expected 28 cents a share. For the full year the company now expects earnings of between $1.07 and $1.13 a share, down from between $1.10 and $1.16 a share. Analysts expect earnings of $1.13 a share for the year.

Xerox also raised its 2014 buyback forecast to at least $700 million from at least $500 million. The company spent $275 million on buybacks in the first quarter.

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TheStreet Ratings team rates XEROX CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate XEROX CORP (XRX) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and expanding profit margins. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, XRX's share price has jumped by 26.79%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, XRX should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.18, which illustrates the ability to avoid short-term cash problems.
  • XEROX CORP' earnings per share from the most recent quarter came in slightly below the year earlier quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, XEROX CORP increased its bottom line by earning $0.93 versus $0.88 in the prior year. This year, the market expects an improvement in earnings ($1.13 versus $0.93).
  • 36.09% is the gross profit margin for XEROX CORP which we consider to be strong. Regardless of XRX's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 5.49% trails the industry average.
  • You can view the full analysis from the report here: XRX Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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