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Xerox Holdings Corp XRX

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Morningstar’s Analysis

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Xerox's Top Line Continues to Spiral Downward; Maintain $22 FVE; Shares Fairly Valued

Julie Bhusal Sharma Equity Analyst

Analyst Note

| Julie Bhusal Sharma |

Xerox started fiscal 2021 with a top line below our expectations as the legacy print company continued to suffer from digitalization trends that have accelerated due to the COVID-19 pandemic. While equipment revenue rebounded, Xerox's primary revenue source, its post-sales revenue, saw another double-digit year-over-year decline for the first quarter. Despite the company's efforts toward operational efficiency through Project Own It, we believe that such efficiency gains will need to work twice as hard to counteract the hit to margins from a diminishing top line. We are maintaining our $22 fair value estimate for no-moat Xerox and view the shares as fairly valued.

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Company Profile

Business Description

Xerox is an original equipment manufacturing and software company. Xerox operates in one segment--design, development and sale of printing technology and related solutions--while deriving 60% of its revenue from the U.S., and 40% from international markets. The company is an OEM of multifunction printers, or MFPs (printers that can print, copy and scan), focusing on large enterprise markets. Apart from equipment, the company provides post-sales services like managed print services--a service that helps to bring smart servicing and efficiencies to how employers use their print/copy equipment. Xerox is attempting to enter new markets like digital print packaging solutions and printed electronics.

201 Merritt 7, P.O. Box 4505
Norwalk, CT, 06851-1056
T +1 203 849-5216
Sector Technology
Industry Information Technology Services
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type High Yield
Employees 24,600